NEW DELHI, March 7 (Reuters) - India is likely to cut royalties paid to Monsanto Co by domestic companies for its genetically modified (GM) cotton seeds again, by 20 percent, industry and government sources said.

The move risks another row with the U.S. company, the world’s biggest seed maker, which threatened to leave India in 2016 when the government cut its royalties by more than 70 percent.

This time, the government plans to reduce royalties by 20.4 percent to compensate Indian seed makers as the government also plans to cut prices of GM cotton seeds to help farmers whose fields have been ravaged by pest attacks, the sources said.

The government will finalise its decision soon, the sources said but gave no precise timeframe.

A Monsanto spokesman said he wasn’t aware of any such government order.

It is expected to lower the prices of GM cotton seeds by 7.5 percent to 740 Indian rupee ($11) for a packet of 450 grams, according to the industry and government sources who did not wish to be identified.

Farmers buy GM cotton seeds from Indian seedmakers who pay to use Monsanto’s proprietary technology to produce them.

More than 90 percent of India’s cotton crop is genetically modified. Last year the government kept both the royalties and the retail prices of GM cotton seeds unchanged.

In 2017/18 India’s cotton output is set to rise 9.3 percent but won’t be the record high predicted by industry analysts because boll worm caused damage in some regions.

New Delhi approved the first GM cotton seed trait in 2003 and an upgraded variety in 2006, helping transform the country into the world’s top producer and second-largest exporter of the fibre. ($1 = 64.8800 Indian rupees) (Reporting by Mayank Bhardwaj; Editing by Susan Fenton)