India sugar drops to 3-month low on supply pressure

MUMBAI Oct 23 (Reuters) - Indian sugar futures extended losses on Tuesday to hit their lowest level in three months due to the government's pressure on mills to increase supplies during the festival season.

* By 0937 GMT, the key November contract on the National Commodity and Derivatives Exchange was down 0.49 percent at 3,275 rupees ($61.13) per 100 kg.

* The contract hit a low of 3,270 rupees, the lowest level for the front-month contract since July 20, earlier in the day.

* Sugar rose 3 rupees to 3,494 rupees per 100 kg at the Kolhapur spot market in the top producing Maharashtra state.

* The government has asked millers to sell 4 million tonnes of sugar in the open market during October and November, higher than the average monthly allocation of around 1.7 million tonnes.

* "Supply pressure is depressing prices. Festival demand is not picking up as per expectations. In the short term, these fundamentals are likely to weigh on prices," said a senior analyst with Religare Commodities.

* Indians will celebrate Dussehra on Wednesday and Diwali in November, when demand for sugar goes up as the consumption of sweets rises.

* A drop in overseas prices also hurt sentiments, dealers said. March raw sugar futures in New York dropped 1.15 percent to 19.83 cents a lb.

* India's sugar output in the 2012/13 year, which started on Oct. 1, is likely to fall to 23.5-24 million tonnes from 26 million tonnes a year earlier. ($1 = 53.5750 Indian rupees) (Reporting by Rajendra Jadhav; Editing by Subhranshu Sahu)