Shivajirao Patil, a leading sugar industry official, said that the real's devaluation could offset the advantage Indian producers gained from the higher duty.

"Brazil is a very big sugar producer and now their prices will become very competitive. They will offer their sugar at very tempting prices and some Indian importers may go for it," Patil said.

Also last week, Brazil, the world's largest sugar exporter, devalued its currency and then surrendered it to market forces, lowering the value of the real -- and to a lesser extent agriculture products -- by nearly 20 week.

Shishir Bajaj, former president of the Indian Sugar Mills Association (ISMA), said the import duty hike was far below industry expectations of 50 per cent and that the rise had merely equated the price of imports with that ofdomestically produced sugar.

"If tomorrow any country grants more subsidy to its sugar or any such incentives, then now it is at a very borderline situation," Bajaj said.

The Agricultural and Processed Foods Export Development Authority (APEDA) has said that by December registered to import 1.9 million tonnes of sugar, of which 1.12 million had already landed in India. Imports from Pakistan alone amounted to more than 500,000 tonnes, APEDA said.

Traders in Pakistan said the Indian import duty hike was unlikely to cut into their exports as domestic prices of sugar had also risen in India.

They said they hoped to export 200,000 tonnes of sugar to India in the new season.

Bajaj said the import duty rise would have some impact on imports but that it was too early to say how much. "Within the next two weeks we will see how much of a dent it had made on imports."

He said domestic sugar prices would show a marginal increase.

"There is lot of scope for the prices to rebound back, they are only recoupinglosses as they had dipped very low. Once the import scenario becomes clearer, then we will be able to predict where the prices stabilise," Bajaj said.

Traders said the price of domestic sugar had risen to between Rs 13,000 ($305.9) and Rs 13,500 a tonne, nearly Rs 300 a tonne higher than last week's levels.

Industry experts estimate 1998/99 sugar output at around 15.5 million tonnes. Output in 1997/98 has been officially estimated at 12.8 million tonnes.