Conceptual AI-generated illustration of sugarcane, sugar and distillation equipment. It does not depict an actual mill.
Crisil Ratings expects sugar mills’ operating margins to narrow by 140–160 basis points to around 6% in financial year 2026–27, even as operating income grows. Its November 9 analysis covers 55 mills that produced nearly a quarter of last season’s sugar, rather than every mill in India.
Breakdown
The agency projects 4–5% operating-income growth but expects a less profitable sales mix. Lower volumes of higher-margin ethanol, higher cane costs and greater dependence on sugar and extra neutral alcohol are central to its forecast.
A decline of 140–160 basis points means a fall of 1.4–1.6 percentage points in operating margin. This is a forecast for the financial year, not a completed annual result or a claim that every mill will earn the same margin.
Why this matters
Policy is changing which cane-derived feedstocks can go into ethanol. A Department of Food and Public Distribution letter dated October 22 says mills and distilleries cannot produce ethanol from sugarcane juice or B-heavy molasses during the period from November 1, 2026 to October 31, 2027. The restriction does not amount to a ban on all ethanol production.
Cane costs are also rising. The Centre approved a fair and remunerative price of ₹365 per quintal at a basic recovery rate of 10.25% for the sugar season starting October 1, 2026. That is 2.81% above the previous season. Recovery-linked adjustments mean ₹365 is not a universal payment rate for every consignment.
The Big Picture
The financial year, sugar season and ethanol supply year follow different calendars. Keeping those periods separate helps explain why a policy change beginning in November can affect a March-ending earnings forecast.
For a mill, a larger sales figure can coexist with a lower operating margin when costs rise or the product mix changes. Financing costs and debt repayments then need separate attention when assessing cash generation.
The Crunch
Crisil’s forecast puts the focus on what mills sell and what it costs to produce it. Actual outcomes will depend on each mill’s mix and costs, rather than the headline sugar price alone.
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