India sugar steady for 2nd day; higher quota weighs.

Oct 9 (Reuters) - Indian sugar futures were treading water for the second straight day on Tuesday as higher quota for October and November offset a likely rise in demand due to festivals and an estimated drop in production.

•  By 1014 GMT, the key November contract on the National Commodity and Derivatives Exchange was up 0.15 percent at 3,322 rupees ($63.31) per 100 kg.

•  At the Kolhapur spot market in Maharashtra state, sugar eased 17 rupees to 3,480 rupees per 100 kg.

•  "Millers are largely keeping their offers steady. They are hopeful about demand due to festivals," said a dealer based in the Vashi spot market near Mumbai.

•  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.

• "There is some kind of uncertainty in the market over production. That is keeping traders' fingers crossed," the dealer said.

•  India's sugar output in the 2012/13 year, which started on Oct. 1, is likely to fall to 23.5 to 24 million tonnes, from 26 million tonnes a year earlier, Farm Minister Sharad Pawar said on Tuesday.

•  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.

•  The country imposes a 10 percent duty on sugar imports. Some industry officials in the western part of the country demand to scrap the duty, while others in northern India ask it be raised. Food Minister K.V. Thomas said on Tuesday the government will examine the proposals.

•  India is set to produce sugar surplus for a third straight year 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.

Source : in.reuters.com