MUMBAI, March 14 (Reuters) - Indian sugar futures rose on Wednesday after hitting a contract low as a lower supplies for March and hopes of an improvement in demand from soft drink makers triggered bargain buying, dealers and analysts said.
* The key April sugar contract on the National Commodity and Derivatives Exchange was up 0.32 percent at 2,821 rupees ($56.42) per 100 kg by 4:53 p.m., after hitting a contract low of 2,795 rupees.
* Prices edged 0.46 percent lower to 2,785 rupees per 100 kg in the spot market in Kolhapur in top producing Maharashtra state.
* “The lower non-levy quota is not allowing market to fall sharply despite weak demand,” said Ashok Jain, president of the Bombay Sugar Merchants Association.
“Soft drink makes are not active in the market, but they will raise purchases in the market as temperature goes up.”
* Demand for the sweetener from ice-cream and beverage makers typically goes up during the summer.
* The government has allowed millers to sell 1.35 million tonnes of non-levy sugar in March, 50,000 tonnes lower than the February allocation.
* 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.
* Rising inventory from ongoing cane crushing weighed on sentiment, dealers said. India produced 18.65 million tonnes of sugar between Oct. 1 and Feb. 29, up from 16.25 million tonnes in the same period a year ago.
* India is estimated to produce 26 million tonnes of sugar in 2011/12, higher than the annual demand of about 22 million tonnes.
$1= 50 Indian rupees Reporting by Rajendra Jadhav; Editing by Aradhana Aravindan