The Food Corporation of India (FCI) sold millions of tonnes of rice to ethanol manufacturers at prices significantly below its procurement cost, according to information disclosed by the Union government in Parliament. Between June 2025 and June 2026, FCI supplied rice to ethanol distilleries at ₹2,250–₹2,320 per quintal, while the government’s average acquisition cost of the grain stood at approximately ₹3,720 per quintal. The difference highlights the substantial subsidy embedded in India’s ethanol blending programme, as the Centre seeks to increase the share of ethanol in petrol to reduce crude oil imports and carbon emissions.
The disclosure has reignited debate over the government’s policy of diverting surplus food grains toward fuel production. Critics argue that selling rice below procurement cost effectively transfers public resources to ethanol producers, while the Centre maintains that the move helps manage excess food stocks, supports the Ethanol Blended Petrol (EBP) programme, and reduces storage costs for surplus grain.
FCI Sold Rice Below Its Procurement Cost
The data shared in Parliament shows a significant gap between the price at which FCI procured rice from farmers and the price at which it sold the grain to ethanol distilleries.
Price Comparison
| Item | Price (per quintal) |
|---|---|
| Average acquisition cost to FCI | ₹3,720 |
| Sale price to ethanol plants | ₹2,250–₹2,320 |
| Approximate discount | ₹1,400–₹1,470 |
According to the government, the lower selling price formed part of the Open Market Sale Scheme (Domestic), under which surplus rice was allocated to grain-based ethanol manufacturers participating in the national ethanol blending programme.
Large Volumes of Rice Diverted to Ethanol
During the period under review, FCI dispatched approximately 6.3 million tonnes of rice to ethanol producers.
The rice supplied was valued at roughly ₹14,596 crore based on the government’s sale price, making it one of the largest allocations of food grain for ethanol production since the programme began.
Supply Snapshot
| Metric | Details |
|---|---|
| Rice supplied | Around 6.3 million tonnes |
| Period | June 2025 – June 2026 |
| Estimated value | About ₹14,596 crore |
| Scheme | Open Market Sale Scheme (Domestic) |
Why the Government Sold Rice at Lower Prices
The Centre has argued that the pricing policy serves multiple objectives.
These include:
- Reducing excessive food grain stockpiles held by FCI.
- Supporting the Ethanol Blended Petrol (EBP) programme.
- Lowering storage and carrying costs for surplus grain.
- Reducing India’s dependence on imported crude oil.
- Helping achieve the national target of 20% ethanol blending in petrol.
Officials have noted that India has accumulated record rice stocks following consecutive bumper harvests, creating pressure on storage infrastructure and increasing carrying costs for the government.
Debate Over Public Subsidy and Food Security
The disclosure has sparked criticism from opposition parties and policy experts, who argue that selling rice below procurement cost amounts to a subsidy benefiting ethanol manufacturers.
Critics contend that:
- Public funds effectively absorb the difference between procurement and sale prices.
- Food grains procured using taxpayer money are being diverted to fuel production.
- Greater transparency is needed regarding pricing decisions and beneficiary companies.
Supporters of the policy argue that:
- Surplus stocks would otherwise incur high storage costs.
- Ethanol blending improves India’s energy security.
- The programme supports cleaner transportation fuels.
- Diverting excess grain prevents wastage while creating additional demand for agricultural produce.
Ethanol Feedstock Is Shifting Toward Maize
The pricing gap comes as policymakers weigh broader reforms, with a rice ethanol policy that could help India reach its 20% blending goal.
While rice has played a major role in recent ethanol production, the government’s feedstock strategy is gradually changing.
Recent official data shows:
- Maize has now overtaken rice as the largest grain supplied by FCI for ethanol manufacturing.
- The shift aims to diversify feedstocks while reducing dependence on food-grade rice.
- Grain-based ethanol producers increasingly switch between rice and maize depending on availability and pricing.
Looking Ahead
The parliamentary disclosure has brought renewed attention to the economics of India’s ethanol blending programme and the role of subsidised food grains in supporting renewable fuel production. Selling FCI rice at prices substantially below its acquisition cost has intensified debate over the balance between promoting clean energy, managing surplus grain stocks, and safeguarding public resources. While the government argues that the policy helps reduce storage costs and advances energy security goals, critics question whether the pricing structure provides disproportionate benefits to ethanol producers.
Looking ahead, the government is expected to rely increasingly on maize and other feedstocks as it pursues higher ethanol blending targets. Future policy decisions on grain pricing, surplus stock management, and biofuel incentives will likely shape both India’s food security strategy and its transition toward cleaner transportation fuels, while remaining under close scrutiny from policymakers, industry participants, and Parliament.
Frequently Asked Questions
How much below cost did FCI sell rice to ethanol plants?
FCI supplied rice to ethanol distilleries at ₹2,250-₹2,320 per quintal, while the government’s average acquisition cost was approximately ₹3,720 per quintal.
Why did the government sell rice at a loss?
The subsidized pricing supports India’s ethanol blending programme, which aims to increase the share of ethanol in petrol to reduce crude oil imports and carbon emissions.
Is the ethanol feedstock mix changing?
Yes, ethanol feedstock is reportedly shifting toward maize.
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