Indian sugar futures fell on Wednesday as expected duty free imports of raws and market talk the government may lift its free sale quota to cap rising prices depressed sentiment.
At 4:11 pm (1041 GMT), the February contract on the National Commodity and Derivatives Exchange was down 2.74 per cent to 2,060 rupees ($42.3) per 100 kg, while the March contract had fallen 2.79 per cent to 2,093 rupees.
"There is a rumour that additional quota has been announced," said Ashwini Bansod, a senior analyst at MF Global Commodities India Ltd.
Spot prices in top producing state Maharashtra fell 1.43 per cent to 2,150.05 rupees, after rising about 6 per cent in previous two days, anticipating higher supplies.
India's government limits the amount of sugar millers can sell freely in the open market to ensure adequate availability and stable prices.
It released 1.5 million tonnes of non-levy or free sale sugar for February.
"It was also a delayed reaction to raw sugar imports," Bansod said of the fall in spot prices.
India on Tuesday allowed duty-free imports of raw sugar for local sale on the condition that a similar quantity of refined sugar is exported within two years.
It replaces an earlier policy under which the importer was obliged to refine the imported consignment and export it.
Government and trade estimates suggest sugar production will fall by nearly a third to around 18 million tonnes in 2008/09 from 26.3 million tonnes a year ago.