At 0941 GMT, the key March sugar contract on India's National Commodity and Derivatives Exchange was up 0.29 percent at 3,097 rupees ($57.35)per 100 kg, after rising to 3,118 rupees earlier.

"In spot markets bulk consumers are slowly raising purchases. They are replenishing inventory for summer months," said a senior official with a co-operative mill based in Satara, Maharashtra.

Demand for the sweetener from ice cream and beverage makers typically rises during the summer season.

Spot sugar climbed 23 rupees to 3,209 rupees per 100 kg in the Kolhapur market in top-producing Maharashtra state.

"This year supplies are sufficient, but next year there might be shortage. In many areas farmers are shifting to other crops from sugar cane due to water shortage," the official said.

India's sugar production for the 2013/14 season is set to fall below consumption for the first time in four years as a water shortage trims acreage in three key states.

India's sugar output rose 3 percent to 13.8 million tonnes on year in the first four months of the season beginning October 2012.

Mills in India are expected to churn out 24.3 million tonnes of sugar in 2012/13, down from 26 million tonnes in the year earlier.

Copyright Reuters, 2013