Centre ring-fences 72 lakh tonne of FCI rice for ethanol push
The food ministry has reserved 72 lakh tonne (LT) of rice from Food Corporation of India (FCI) stocks for ethanol distilleries for the Ethanol Supply Year (ESY) 2026-27 (November 2026 to October 2027), up from 52 LT allocated in ESY 2025-26
An additional 55 LT of 100% broken rice has been earmarked for sale through open e-auction under the Rice Milling Transformation (RMT) scheme, which ethanol producers may also procure
The approved sale price for the reserved rice is ₹2,390 per quintal to distilleries; the reserve/base price for RMT broken rice auctions is set quarterly by a Dynamic Reserve Price (DRP) committee
Allocations for national cooperatives (Nafed, NCCF, Kendriya Bhandar) for retail sale under the "Bharat" rice brand have been deferred, with quantities to be intimated later
The move is intended to secure ethanol supply as the government considers raising the blending share beyond the current 20%, and as sugarcane/maize output faces monsoon-related uncertainty
Ethanol Blending Programme (EBP) and the E20 Target
The Ethanol Blending Programme mandates blending of ethanol with petrol and has been running since 2014 through public sector Oil Marketing Companies (OMCs). The National Policy on Biofuels, 2018 originally set an indicative target of 20% ethanol blending by 2030; this was advanced, via a 2022 amendment, to Ethanol Supply Year 2025-26. India reached the 20% (E20) blending milestone in 2025, roughly five years ahead of the original schedule.
Key Details
- Blending progression: 10% blending achieved June 2022 (five months early); 12.06% in ESY 2022-23; 14.60% in ESY 2023-24; 17.98% in ESY 2024-25 (up to February 2025); 20% (E20) achieved in 2025
- OMCs are mandated to procure ethanol produced from FCI rice at ₹58.5 per litre, and from broken rice at ₹64 per litre — a differential pricing structure that shapes distillery feedstock choices
- Annual ethanol production is close to 2,000 crore litres, against an OMC requirement of 1,050-1,100 crore litres per year to sustain the 20% blending target
- The government is now exploring blending beyond 20%, with testing and trials underway on higher blends and vehicle compatibility
Reserving 72 LT of FCI rice, and freeing up 55 LT of broken rice for open-market purchase by distilleries, is a direct feedstock-security measure to sustain and potentially exceed the E20 target amid weather-driven uncertainty in sugarcane and maize supply.
National Policy on Biofuels, 2018 (amended 2022) — Feedstock Diversification
The 2018 policy categorises biofuels into Basic Biofuels (First Generation bioethanol/biodiesel) and Advanced Biofuels (Second Generation ethanol, biomass-based, drop-in fuels, Third Generation biofuels), and permits use of a wide range of feedstocks including sugarcane juice, molasses, damaged foodgrains, and surplus rice/maize, subject to National Biofuel Coordination Committee approval.
Key Details
- The 2022 amendment expanded permitted feedstock to include surplus foodgrains (like rice) when in surplus, following Food Corporation approval, to de-risk the programme from sugarcane/molasses supply shocks
- Comparative cost of ethanol production: sugarcane B-heavy molasses (~₹71.7/litre) and sugarcane juice (~₹85.5/litre) are cheapest; maize-based ethanol costs roughly ₹95/litre; rice-based ethanol is costliest at roughly ₹126/litre against an OMC procurement benchmark of about ₹60/litre — meaning rice-based ethanol requires the largest implicit subsidy
- FCI is the nodal procurement and stock-release agency operating under the Department of Food and Public Distribution
Because rice-based ethanol is the most expensive feedstock route, the higher OMC procurement price for broken-rice ethanol (₹64/litre versus ₹58.5/litre for FCI rice) reflects a deliberate policy trade-off to keep distillery economics viable even at higher input costs.
FCI's Open Market Sale Scheme (OMSS) and Buffer Stock Norms
FCI releases foodgrain stocks held in excess of the buffer norms (fixed quarterly by the Cabinet Committee on Economic Affairs) into the open market through e-auctions under the Open Market Sale Scheme (Domestic), to moderate prices and manage surplus stock, alongside the separate targeted allocations for distilleries and welfare schemes.
Key Details
- Buffer norms are set as on 1 April, 1 July, 1 October, and 1 January each year; the central pool must also cover about 80 crore National Food Security Act (NFSA) beneficiaries
- The rice being allocated for ethanol and open-market e-auction in this instance is surplus/broken rice, separate from PDS allocations, priced through category-specific reserve prices (ranging roughly ₹2,000-3,180 per quintal depending on grade and buyer category in this allocation cycle)
- This allocation mechanism illustrates how FCI balances food security obligations (NFSA, PDS) against commercial disposal of surplus stock for industrial uses like ethanol
The tiered pricing structure disclosed in this allocation — separate rates for distilleries, state governments, cooperatives, and private e-auction buyers — reflects FCI's broader OMSS framework for managing surplus stock beyond mandated buffer requirements.
- FCI rice reserved for ethanol, ESY 2026-27: 72 LT (up from 52 LT in ESY 2025-26), at ₹2,390/quintal
- Additional broken rice earmarked for open e-auction (RMT scheme): 55 LT
- OMC ethanol procurement price: ₹58.5/litre (from FCI rice) and ₹64/litre (from broken rice)
- E20 (20% ethanol blending) target achieved in 2025, five years ahead of the original 2030 deadline under the National Policy on Biofuels, 2018
- Annual ethanol production: ~2,000 crore litres; OMC annual requirement to sustain 20% blending: 1,050-1,100 crore litres
- Comparative ethanol production costs: sugarcane B-heavy molasses ~₹71.7/litre (cheapest) vs rice-based ethanol ~₹126/litre (costliest)