Shares of sugar companies remained under pressure for the
second straight day on Wednesday after the government announced restrictions on
sugar exports from June 1, the latest slew of measures to control surging
inflation.

Dwarikesh Sugar Industries dropped 9%, Dalmia Bharat
Sugar and Industries 15%, Triveni Engineering & Industries 8%, Balrampur
Chini Mills 9%. Avadh Sugar & Energy lost 8%, Shree Renuka Sugars 7% and
Uttam Sugar was down 9% in intraday trade.

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Following the wheat export ban and hike in export duty on
certain steel products, the government said it would restrict sugar exports to
10 million tonnes to keep domestic prices in check. “As per the order issued by
DGFT, with effect from June 1, 2022, till October 31, 2022, or till further
order, whichever is earlier, the export of 
sugar will be allowed with specific permission of the Directorate of
Sugar, Department of Food and Public Distribution,” it said.

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According to analysts, 10 million tonnes was a “fairly
large-cap” and it would “help mills to export the maximum amount and keep the
bare minimum in the country”.

“The government’s initiatives to rein in inflation
indicate margin compression for segments like sugar, edible oil and metals but
firms with pricing power can weather this storm”, said VK Vijayakumar, Chief
Investment Strategist at Geojit Financial Services.

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According to the Food Ministry, the decision followed
record exports of sugar.  India is the
second-largest producer, after Brazil, and the biggest consumer of sugar in the
world. The country exported a record 7 million metric tonnes in 2021-22 and
5.96 million tonnes in 2019-22.

Initially, India planned to cap sugar exports at 8
million tonnes, but after production estimates were revised upward, the
government decided to allow mills to sell some more sugar.

The Indian Sugar Mills Association, a producers’ body,
revised its output forecast to 35.5 million tonnes, up from its earlier
estimate of 31 million tonnes.