The key October contract on the National Commodity and Derivatives Exchange was up 0.28 percent at 3,565 rupees ($64.33) per 100 kg at 1045 GMT.

In the Kolhapur spot market in the top-producing Maharashtra state, sugar rose 14 rupees to 3,562 rupees per 100 kg.

India's sugar output in 2012/13 is expected to fall to 24 million tonnes, down from an earlier estimate of 25 million tonnes, the Indian Sugar Mills' Association (ISMA) said in a statement on Monday.

"The downward revision by ISMA lifted sentiments. Stockists have been active in the market for the past few days expecting higher demand during festivals," said a trader based in the Vashi market near Mumbai.

Indians celebrate the Ganesh festival this month, which will be followed by Dussehra in October and Diwali in November. Sugar consumption usually rises during the festival period.

Sugar output in Maharashtra is likely to fall 30 percent year-on-year to 6.3 million tonnes in 2012/13 on poor cane yields due to drought and diversion of the crop for fodder, a state official said.

The Indian government has given additional 10 days to sugar mills to sell around 200,000 tonnes of unsold non-levy sugar stocks of August.

India, the world's largest consumer of sugar, is likely to become a net importer of the sweetener as early as 2013/14, as drought-hit farmers replace cane with less water-intensive crops.

Indian sugar exporters are in talks to cancel sales of more than 500,000 tonnes of white sugar after domestic prices surged and buyers found cheaper supplies from competitors Brazil and Thailand, four trading sources told Reuters on Aug. 30.