* Sugar futures prices fall after India export news
* India could have 1.5 million tonnes more to export-trade
* Focus will shift to Indian sugar stock levels
By David Brough and Mayank Bhardwaj
LONDON/NEW DELHI, March 22 (Reuters) - A decision by India to approve 500,000 tonnes of unrestricted sugar exports, which triggered a fall in futures prices on Tuesday, will set the stage for further exports and relieve global supply tensions.
India, the world's number 2 sugar producer after Brazil, said on Tuesday it would allow 500,000 tonnes of sugar exports, the first unrestricted overseas sales of the sweetener in three years.
Sugar futures fell from below 30-year highs, dealers said, as the market had widely anticipated approval of just 200,000 tonnes of so-called "Open General Licence", or unrestricted, exports.
Analysts said India would probably approve more exports in coming months, helping to ease bottlenecks around the world.
"We could well see exports after these 500,000 tonnes," a senior analyst with a Western trade house said.
But how much more India exports will depend on the size of its harvest in 2010/11, which remains unclear.
"People were buying the market on expectations that they weren't going to release as much (as 500,000 tonnes)," one senior London sugar broker said.
"I think you will see at least 1.5 million tonnes of OGL exports this year. The government is waiting for confirmation of the size of the crop, then they will get a move on," the London broker added.
The global sugar market, underpinned by tight supplies and low stocks, had been on tenterhooks for months awaiting a decision on Indian OGL sugar exports.
India is a barometer for the sugar market. In some years it is a big supplier after a good harvest, and in other years it is a major importer if the domestic crop is poor.
Analysts currently expect Indian output in 2010/11 to be around 24-25 million tonnes and domestic consumption at around 22.5 million tonnes, lower than initially expected due to high prices.
The estimated 2 million tonnes of excess sugar output over consumption in India could pave the way for some 1.5 million tonnes of additional exports, as long as India does not move to build up stocks.
For now domestic stocks in India are ample as the harvest winds up, but a key question will be whether stocks will be adequate before the start of the next harvest.
The approval of higher-than-expected exports on Tuesday is likely to push depressed Indian domestic sugar prices higher as availability on the national market will tighten.
"This move will improve sentiment about domestic prices in the short run, and prices may rise by 100-150 rupees ($2.22) per tonne, while global white sugar prices may ease by $5-10 per tonne," said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants' Association.
London May white sugar futures extended losses after the export announcement to reach as low as $684 per tonne, before closing at $700.40 per tonne, down $5.90.
ICE May raw sugar was down 0.22 cent or 0.8 percent to 27.26 cents a lb at 1754 GMT.
CROP SIZE
The amount of future unrestricted Indian sugar exports and the evolution of Indian domestic prices will hinge on the progress of the remainder of the cane crush, which will wrap up next month.
Analysts said the delay in approval of Indian OGL sugar exports had deprived Indian millers of the opportunity to lock in sales at high prices. The market had touched a 30-year peak of 36.08 cents a lb on Feb. 2.
"This move will help stabilise domestic prices and help mills to pay cane growers' dues," said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, a producers' body of 250 mills.
As a consequence of lower local prices, Indian mills' outstanding payments to cane growers rose to 40 billion rupees ($886 million) up to Dec. 31.
(Editing by Jane Baird)