MUMBAI, Aug 21 (Reuters) - Indian sugar futures fell nearly 2 percent on Tuesday on sluggish demand and additional supply of non-levy sugar, though a likely rise in demand next month due to festivals limited the downside.
* The key September contract on the National Commodity & Derivatives Exchange was down 1.55 percent at 3,420 rupees ($61.62) per 100 kg at 0905 GMT, after falling to 3,407 rupees earlier in the day.
* Sugar in the Kolhapur spot market in top-producing Maharashtra state was steady at 3,432 rupees per 100 kg.
* "Retail demand was weak for the past few days. We may see a drop of another 50 rupees," said Ashok Jain, president of the Bombay Sugar Merchants Association.
"But a sharp fall is unlikely. Next month we have key Ganesh festival, when demand will improve."
* Earlier this month, India released 400,000 tonnes of additional non-levy sugar for the September quarter, over and above the previous allocation of 4.766 million tonnes.
* Non-levy, or free-sale, sugar is sold by millers in the open market, but the quantity each mill can sell is fixed by the federal government on a quarterly basis.
* India is expected to have opening sugar stocks of 7 million tonnes in the new crop season from Oct. 1, compared with 5.5 million tonnes a year ago, the Indian Sugar Mills Association (ISMA) estimates.
* ISMA forecast an output of 25 million tonnes for the crop season starting in October, but dealers say achieving this is nearly impossible due to poor rainfall in Maharashtra and Uttar Pradesh.
* Port congestion in Brazil, the world's biggest sugar exporter, has delayed exports, although lineups are easing.
$1 = 55.5 Indian rupees Reporting by Rajendra Jadhav; Editing by Jijo Jacob