* Ample monsoon rains allow farmers to expand area
* Surplus output to weigh on local sugar prices
* Govt may be forced to provide subsidy for exports
By Rajendra Jadhav
SATARA, India, Jan 19 (Reuters) - India is set to produce surplus sugar for a fifth straight year in 2021/22 as farmers expand sugarcane acreage encouraged by surplus rains and government-backed export incentives, four industry officials said.
Higher output would add to India's swelling stockpiles and could force New Delhi to again subsidize exports to tackle the surplus. The subsidized exports from the world's second largest producer could weigh on global prices SBc1 LSUc1 .
"It's tough to give an estimate now for next season's sugar output, but it would be higher than this year's," said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories.
The Indian Sugar Mills Association, the national industry association for producers, estimates output at 31 million tonnes in the 2020-21 marketing year ending Sept. 30, against annual demand of around 26 million tonnes.
The June-September monsoon rainfall in 2020 was above average for the second year in a row - the first time that has happened in decades, replenishing reservoirs and ground water supplies.
"Sugarcane gives us better returns than other crops, but we often could not plant it due to water scarcity," said Shrikant Ingale, a farmer in the western state of Maharashtra, who has planted sugarcane for the first time in three years on his four acres of land.
Maharashtra, along with the states of Karnataka and Uttar Pradesh, account for nearly 80% of India's sugar output.
Farmers in Maharashtra, which typically accounts for a third of India's sugar output, have planted sugarcane on 449,911 hectares as of Jan. 18, up nearly 40% from a year ago, government data shows.
The surplus production in the next season could force India to continue providing a subsidy for sugar exports, said a Mumbai-based dealer with a global trading firm.
"Exports are a must to avoid a crash in local prices. And exports are not possible without a subsidy," the dealer said.
In mid-December, India approved a subsidy for the third straight year to encourage cash-strapped mills to export some 6 million tonnes of sugar in 2020/21.