India sugar flat as festive demand negates higher quota

MUMBAI Oct 8 (Reuters) - Indian sugar futures were treading water on Monday as hopes of an improvement in demand due to festivals outweighed higher supplies and a drop in overseas prices.

* By 0928 GMT, the key November contract on the National Commodity and Derivatives Exchange was up 0.06 percent at 3,330 rupees ($63.67) per 100 kg.

* At the Kolhapur spot market in Maharashtra state, sugar edged lower 6 rupees to 3,500 rupees per 100 kg.

* "Demand will improve as we are heading towards the peak festive season. Stockists have already started buying," said Harakhchand Vora, vice-president of the Bombay Sugar Merchants Association.

* "Despite higher quota, prices are likely to improve from the current level due to festival demand."

* A majority of Indians will celebrate Dussehra this month and Diwali in November. Demand for sugar usually rises during these festivals.

* The government has allowed millers to sell 4 million tonnes of non-levy sugar in October and November, higher than the average monthly allocation of around 1.7 million tonnes.

* 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.

* New York raw sugar futures were 0.42 percent lower at 21.45 cents per lb at 0949 GMT.

* Resumption in sugar imports and a halt in exports also weighing on sentiments, dealers said.

* Indian traders have sealed deals to import about 5,000 tonnes of white sugar from Pakistan, which allowed an extra 200,000 tonnes of overseas sales, sources said last week.

* Indian mills have signed deals to buy up to 450,000 tonnes of Brazilian raw sugar for delivery from October to December as a gap between domestic and overseas prices widens, making room for the first imports in more than two years.

* India is set to produce sugar surplus for a third straight year in a row in 2012/13, but the abundance is unlikely to find overseas buyers as millers will want a hefty premium over world prices to meet higher production costs.

* The country is likely to produce 24 million tonnes of sugar in 2012/13, higher than the local annual demand of around 22.5 million tonnes.

($1 = 52.3 Indian rupees) (Reporting by Rajendra Jadhav; Editing by Subhranshu Sahu)