New Delhi, Nov. 9 -- Sugar mills are expected to face a 140-160 basis point decline in operating margins to around 6 per cent this fiscal year, as reduced ethanol production from sugar-based feedstocks, higher sugarcane procurement costs and rising funding requirements put pressure on profitability, according to a report by Crisil Ratings.

The report highlighted that the margin squeeze is expected despite firm sugar prices and an estimated 4-5 per cent growth in operating income, as higher sugar realisations are unlikely to fully compensate for the loss of higher-margin ethanol volumes and rising input costs.

Crisil stated, "As a result, operating margins and credit metrics are expected to weaken across the sector, increasing vulnerabil...