Mumbai: Indian spot sugar prices climbed on Wednesday after the agriculture minister said stocks at beginning of the new season in October would be “much smaller” and on hopes of an improvement in festive demand, analysts said.

In Kolhapur, a key market in top producer Maharashtra, the price of the most traded S-variety sugar rose 1.7% to Rs2,886.25 ($58.9) per 100 kg.

The spot price had risen more than a quarter in August, while in 2009 it has jumped more than 57%.

India’s new sugar season will begin with much lower stocks and production will be hit by lower sugar recovery from cane after the failure of monsoon rains, agriculture minister Sharad Pawar said on Tuesday.

Last week, the head of the National Federation of Cooperative Sugar Factories Ltd, J.B. Patel, said India’s opening stocks would be at 2.7 million tonnes, down three quarters from 10 million tonnes on 1 October, 2008.

“Lower opening stocks are prompting mills to raise prices. Demand is also set to rise during festivals,” said a member of the Bombay Sugar Merchants Association.

The country’s peak festival season runs from August to October, when demand for sugar goes up as people consume more sweets and confectioneries.

“Traders were confused as the government has delayed announcement of non-levy sugar quota for September,” the member said.

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.

In last week of the month, the government usually announces quota for next month, but it hasn’t announced it for September yet.

In August India had released 1.67 million tonnes of sugar in the open market.

India has put stock limits for big companies, wholesale traders and retailers to curb the hoarding.