Government on Friday hiked the import duty on both raw and refined sugar to 25 per cent from the existing 15 per cent.

The increase in duty would make imports unviable and may help revive the business of cash-starved mills who owe farmers around Rs 6,800 crore.

India has been importing sugar in small quantities taking advantage of lower global prices.

According to the notification issued by the Central Board of Excise and Customs, import duty has been raised to 25 per cent on raw sugar and refined or white sugar.

The higher duty will also be applicable to bulk consumers who import raw sugar, the government said, adding that this has been done in public interest.

The Food Ministry had recommended increase in import duty on sugar to 40 per cent.

Currently, domestic sugar prices are ruling stable in the range of Rs 34-40 per kg in view of surplus stocks, as per the data maintained by the Consumer Affairs Ministry.

Sugar mills are facing a cash crunch as domestic prices have slipped below the cost of production, hurting their profits.

Mills in Uttar Pradesh are selling sugar at Rs 30.50 per kg, while the cost of production remains at Rs 37 per kg.

Similarly, mills in Maharashtra are selling the commodity at Rs 28.50 per kg as against the cost of production of Rs 31.

Industry Body Indian Sugar Mills Association (ISMA) hailed the decision saying this will improve cash-flow of millers and help clear cane arrears.

The government has announced several measures to improve liquidity of millers.

Earlier this year, the government had rolled out a scheme of Rs 6,600 crore interest-free loan to mills for making cane payments to growers. It is also giving export subsidy.