As of 0903 GMT, the benchmark February sugar contract on the National Commodity and Derivatives Exchange was up 0.4 percent at 3,289 rupees ($60.03)per 100 kg.

"Mills are slowly cutting prices, but demand is still not improving. The demand from north Indian buyers has declined," said a Delhi-based dealer.

Sugar eased by 6 rupees to 3,257 rupees per 100 kg at the Kolhapur spot market in top-producing Maharashtra state.

Demand for sugar from bulk consumers like soft-drink and ice-cream makers usually drops during winter.

"Mills can't pay farmers the promised price for cane if sugar prices fall further.

There is a need to raise duty on imports and the government may do it soon," the dealer said.

Sugar mills' production cost rose this year after they agreed to pay farmers a higher price for cane.

Indian sugar mills produced 4.9 million tonnes between Oct. 1 and Dec. 15, up 2 percent from a year earlier.