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UPDATE 1-India's sugar output seen dropping on lower monsoon rains

* Output seen at 27 mln T in 2019/20 vs 33 mln T yr ago

Drought hits cane plantations in Maharashtra, Karnataka

* Maharashtra seen producing 6 mln T vs 10.7 mln T a yr ago (Adds detail, background)

By Rajendra Jadhav

MUMBAI, July 9 (Reuters) - India's sugar output could fall 18% in 2019/20 after drought last year forced farmers to curb their cane planting and as weaker monsoon rains this year limit crop growth, a senior industry official said.

Lower production could help India reduce stockpiles that have been boosted by two years of record output and lower-than-expected exports. India is the world's top sugar consumer and the No.2 producer of the sweetener.

Indian sugar production during the 2019/20 marketing year starting from Oct. 1 could fall to 27 million tonnes from 33 million tonnes in 2018/19, B.B. Thombare, president of the Western India Sugar Mills Association (WISMA), said on Tuesday.

"Cane plantation in Maharashtra and Karnataka is hit badly due to last year's drought and this year's delay in arrival of monsoon rains," he said.

The western state of Maharashtra is the country's second-biggest sugar producer, while the southern state of Karnataka ranks third. Uttar Pradesh is the biggest producing state.

Maharashtra's output could fall 44% to 6 million tonnes in the next season, he said.

India has received rain that is 19% less than average since the monsoon season began on June 1, after last year's drought wilted crops in western and southern India.

Despite lower production, India will still have to export sugar in the next season due to ample stock from two years of ample harvest, Thombare said.

Sugar inventories are likely to rise to 14.7 million tonnes at the beginning of the new season on Oct. 1, up 37.4 percent from a year ago, estimates the Indian Sugar Mills Association (ISMA).

Years of bumper cane harvests and record sugar production have hammered domestic sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.

To bring down cane arrears and reduce rising inventories, New Delhi has been providing incentives to mills for overseas sugar sales and set an export target of 5 million tonnes for 2018/19.

"Mills will start the new season with a record inventory. It won't come down without exports," said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories Ltd (NFCSF).

Sugar production will fall in the next season but it will still be higher than local demand of around 26 million tonnes, he said.

Farmers have started planting cane for 2020/21 season but the area has been lagging due to lower rainfall and could fall if rains fail to pick up in the next two months, Naiknavare said.

Cane is a perennial crop harvested 10 to 16 months after planting. (Reporting by Rajendra Jadhav; editing by Christian Schmollinger)