Sunil,
If you take the sender unit out of the tank (disconnect your battery leads first), you'll see that it has a sliding contact that moves over a wound element, like a rheostat in a dimmer switch. That element gets crudded up, worn through, or corroded through. If you are lucky, it's just dirty, and you can clean it, but usually they are beyond help, and you'll have to replace it. I've heard that there are some generic, aftermarket senders that can be used, but I couldn't find them and replaced the ones on two of my cars with original, VDO units that are available from the usual suppliers. Pricey though.
Bob S.
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We don't stop playing because we grow old, we grow old because we stop playing.