India, the worlds biggest sugar consumer, should restore a 60% import tax on refined sugar to guard against dumping amid plunging global prices, a producers group said.

Supplies in India from local producers and imports are sufficient to meet demand, said MN Rao, deputy director general of the Indian Sugar Mills Association. The government should halt duty-free imports and take immediate steps to prevent a further drop in local sugar prices, he said.

There should be no free import of white sugar anymore, Rao said on Thursday in a phone interview . The current global prices can easily lead to dumping of sugar in India and the government should immediately act.

White sugar prices in London have tumbled 36% from a two-decade high in mid-January on reports of improved crop prospects in India and delayed orders by buyers, including Egypt and Pakistan. Prices in Mumbai, Indias biggest wholesale market, slumped 23% from a record Rs 4,050 rupees ($89) per 100 kilograms on January 8, resulting in mills selling below cost.

White sugar for May delivery jumped 1.2% to $490.80 a tonne at 9:55 a.m. local time on the Liffe exchange in London, extending Wednesdays 2.3% advance. Prices in Vashi dropped 2.5% to Rs 3,110.10 per 100 kilograms.

The government has extended duty-free imports of white and raw sugar until December 31, ordered bulk consumers to hold inventories for no more than 10 days from 15 days earlier, and asked mills to sell on a weekly basis from fortnightly, to bolster domestic supplies and cool food-price inflation.

The fall in sugar prices is affecting the cane price payment and also has an adverse psychological impact on farmers, the National Federation of Co-operative Sugar Factories said in a letter to agriculture minister Sharad Pawar on March 23.

There is a need to sustain the interest of farmers in sugar cane cultivation, the group said.

The producers co-operative wants the government to end the stockpile limits on bulk sugar users, restore monthly sale permits for mills and tax on imported sugar, managing director Vinay Kumar said. Mr Pawar on March 18 said the duty-free imports will stay.

India became the largest importer this year because crop damage from insufficient rains shrank production to less than domestic demand. Supplies from local harvests and imports may total 25.4 million tonnes this season, leaving a surplus of at least 3 million tonnes, sugar mills associations Rao said. All the sugar contracted to be imported at high prices may not be shipped now, Rao said. Some of the bulk users of sugar may be forced to wash-out contracts.