India’s open market rice sale norms will likely help meet 20% ethanol blending target
The Central government's Open Market Sale Scheme–Domestic (OMSS-D) policy for 2026-27 (effective July 1, 2026 to June 30, 2027) allows Food Corporation of India (FCI) rice to be sold to ethanol distilleries at a discounted reserve price.
FCI rice for ethanol is priced at ₹2,320 per quintal until October 31, 2026, rising to ₹2,390 per quintal from November 1 — both below the paddy Minimum Support Price (MSP), effectively subsidising rice as an industrial feedstock rather than a food grain.
The FCI rice allocation earmarked for ethanol production has been raised to 72 lakh tonnes for Ethanol Supply Year (ESY) 2026-27, up from 52 lakh tonnes in ESY 2025-26.
As of June 2026, distilleries had already used about 3.9 million tonnes of FCI rice and 6.8 million tonnes of maize as ethanol feedstock.
Experts note that surplus FCI rice stocks are increasingly being treated as an industrial raw material for fuel rather than solely a food-security buffer.
Ethanol Blended Petrol (EBP) Programme and the National Policy on Biofuels
The EBP Programme, run by the Ministry of Petroleum and Natural Gas, mandates blending of ethanol with petrol to cut crude oil import bills and vehicular emissions. The National Policy on Biofuels, 2018 (amended in 2022) advanced the 20% blending (E20) target from 2030 to Ethanol Supply Year 2025-26. India in fact crossed the 20% blending mark in November 2025, roughly five years ahead of the original schedule, and E20 fuel became mandatory across all States and Union Territories from April 1, 2026.
Key Details
- Blending trajectory: 12.06% (ESY 2022-23) → 14.60% (ESY 2023-24) → 17.98% (ESY 2024-25, up to February 2025) → over 20% achieved by November 2025.
- The 2018 policy promotes multiple feedstocks: sugarcane/molasses (C-heavy, B-heavy), damaged food grains, surplus rice/maize, and agricultural residues — moving away from sugarcane-only ethanol.
- The government's next-phase target (E30, i.e., 30% blending) is under discussion for rollout between 2028 and 2030, pending further scientific and engine-compatibility studies.
The discounted OMSS-D pricing for FCI rice is a direct feedstock-diversification measure — using foodgrain-based ethanol (alongside sugarcane and maize) to sustain the blending programme once the original E20 target had already been met, ensuring supply doesn't bottleneck future targets.
Food Corporation of India, OMSS and the MSP-versus-Market Trade-off
FCI procures foodgrains at the Minimum Support Price (MSP) fixed on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and holds buffer stocks for the Public Distribution System (PDS) and price stabilisation. The Open Market Sale Scheme allows FCI to sell surplus stock to bulk buyers (traders, industries, or ethanol distilleries) outside the PDS, either via e-auction or fixed-price allocation, to manage excess inventory and moderate open-market prices.
Key Details
- Selling FCI rice to ethanol units below the paddy MSP is a policy choice to liquidate surplus stock productively rather than let it degrade in storage, while still costing the exchequer the MSP-to-OMSS-price gap as an implicit subsidy.
- OMSS-D 2026-27 also covers wheat and coarse grains sales from FCI stock, not just rice.
- CACP's annual MSP recommendations for paddy are the anchor price against which this discounted ethanol-sale price is compared.
The reduced OMSS rate for ethanol-bound rice reflects a shift in FCI's stock-management strategy — from pure food-security buffering toward actively channelling surplus grain into an energy-security use case (ethanol blending), which experts flag as an emerging trend given India's persistently high rice stocks.
- OMSS-D policy for 2026-27: effective July 1, 2026 to June 30, 2027; covers rice, wheat, and coarse grains from FCI stock.
- FCI rice price for ethanol distilleries: ₹2,320/quintal (till October 31, 2026), rising to ₹2,390/quintal (from November 1, 2026) — both below paddy MSP.
- FCI rice allocation for ethanol: raised to 72 lakh tonnes for ESY 2026-27 (from 52 lakh tonnes in ESY 2025-26).
- Feedstock used till June 2026: about 3.9 million tonnes of FCI rice and 6.8 million tonnes of maize.
- National Policy on Biofuels, 2018 (amended 2022): advanced the 20% ethanol-blending target to ESY 2025-26; India crossed 20% blending in November 2025, and E20 became mandatory nationwide from April 1, 2026.