Sugar futures enjoyed a slight jump on Friday, a day after the government cleared a plan to provide interest-free loans to strolling sugar mills.

On Thursday, the Cabinet Committee on Economic Affairs (CCEA) approved a plan to give interest-free loans of Rs 6,600 crore to sugar mills to enable them pay off cane arrears. The huge bailout package was cleared after most of the country's sugar mills expressed their inability to pay off soaring cane arrears.

Commenting on the development, Bombay Sugar Merchants Association's President Ashok Jain said, "Some mills are making distress sale in the market as they need money to make cane payments. The government assistance can reduce distress sale."

In morning trade on Friday, the key January contract for sugar was up 0.33 per cent at Rs 2,769 per 100 kilogram (kg) on the National Commodity and Derivatives Exchange. On December 12, it hit Rs 2,746 per 100 kg, the lowest level in more than a couple of years.

In foreign markets, raw sugar futures were trading at a gain of 1.73 per cent as low prices prompted buying. In the previous session, raw sugar futures had jumped 1.6 per cent.

Spot sugar was trading at Rs 2,871 per 100 kg, up Rs 3, at the Kolhapur market in Maharashtra.

Sugar mills are still worried about the existing massive stocks, as the country is set to produce surplus sugar for the fourth consecutive year.