Aug 13 2009 4:39PM
MUMBAI, Aug 13 (Reuters) - Indian spot sugar prices dropped on Thursday on weak demand and speculation government will release additional non-levy sugar to calm prices in the festive season, analysts said.
Non-levy, or free sale sugar, is sold by millers in the open market, but the quantity each mill can sell is fixed by the federal government on a monthly basis.
"Market is talking about an additional quota. Our association has been demanding release of 300,000 tonnes additional quota for August," said Ashok Jain, president of the Bombay Sugar Merchants Association.
In Kolhapur, a key market in top producer Maharashtra, the price of the most traded S-variety sugar dropped 2.84 percent to 2,863.35 rupees per 100 kg.
The spot price has risen 22.7 percent in August, while in 2009 it has jumped 55.8 percent.
"Traders have postponed buying expecting additional quota," Jain said.
The country's peak festival season runs August-October, when demand for sugar goes up as people consume more sweets and confectioneries.
Traders estimate stocks at the beginning of the new season, including imported sugar, are likely to be 4 million tonnes, down from 10 million tonnes a year ago.
Higher global prices make imports expensive, holding up local prices.
India's sugar output in 2009/10 is expected to reach 17 million tonnes, lower than the previously estimated 17.5-18.5 million tonnes, as erratic rains are likely to cut yields, a senior industry official said. See [ID:nBOM502476]
Traders forecast a 45 percent drop in India's sugar output to 14.7 million tonnes in the crop year to September.
India has extended its scheme to allow duty-free raw sugar imports until March and white sugar imports up to November
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