Indian sugar futures dropped on Thursday to hit their lowest level in two-and-a-half years as the government deferred a decision on providing financial assistance to mills for raw sugar production.
"The market was expecting a decision in today's meeting. The delay is harmful for the industry," said a Mumbai-based dealer.
At 1008 GMT, the key March contract on the National Commodity and Derivatives Exchange was down 1.20 percent at 2,635 rupees per 100 kg. It fell to 2,630 rupees earlier in the day, the lowest level since June 22, 2011.
India appears set to increase sugar exports to Asia and the Middle East if, as expected, the government extends production incentives to cash-strapped mills.
India started the new sugar marketing year on Oct. 1 with stocks of 8.8 million tonnes. It is expected to produce 25 million tonnes this year against a demand of 23 million tonnes.
Spot sugar rose by 9 rupees to 2,699 rupees per 100 kg at the Kolhapur market in Maharashtra.