Guwahati: The Food Corporation of India (FCI) sold 63.5 lakh tonnes of rice to ethanol distilleries between June 2025 and June 2026 at prices significantly lower than its procurement cost, according to a written reply in the Rajya Sabha.
Minister of State for Consumer Affairs, Food and Public Distribution Nimuben Jayantibhai Bambhaniya informed the House that FCI supplied rice worth Rs 14,596.78 crore from its warehouses to ethanol plants during the 12 months.
The rice was sold under the Open Market Sale Scheme (Domestic) at Rs 2,250 per quintal from June to October 2025 and at Rs 2,320 per quintal from November 2025 to October 2026. The price has been fixed at Rs 2,390 per quintal for the period from November 2026 to June 2027.
However, FCI’s average acquisition cost of rice was much higher – Rs 3,719.72 per quintal in 2024-25 and Rs 3,889.46 per quintal in 2025-26, according to revised estimates. This means the sale price to ethanol producers was around 40% lower than the cost incurred by FCI to procure rice from farmers.
Haryana emerged as the largest recipient among the top five states, receiving 8.44 lakh tonnes of rice for ethanol production. Uttar Pradesh followed with 8.38 lakh tonnes, while Punjab and Himachal Pradesh together received 6.58 lakh tonnes. West Bengal received 5.84 lakh tonnes and Madhya Pradesh 4.32 lakh tonnes.
The government said no subsidy was being provided to ethanol manufacturers as rice was sold at the notified OMSS (D) price. However, the reply did not clarify how the difference between the sale price and FCI’s acquisition cost would be accounted for.
Agriculture expert GK Sood said selling rice below the economic cost effectively amounts to an indirect subsidy. He pointed out that the government plans to allocate 72 lakh tonnes of FCI rice for ethanol production during the 2026-27 ethanol supply year at around Rs 23,900 per tonne, compared to an estimated economic cost of nearly Rs 43,100 per tonne.
According to Sood, unless the cost difference is separately reflected in the Union Budget, it could eventually add pressure to the food subsidy burden.
He also questioned the policy of using large quantities of rice for ethanol production, arguing that rice cultivation already involves significant government support and requires high water consumption.
Economist Madan Sabnavis of Bank of Baroda said the pricing mechanism appears to have been designed around the economics of ethanol supplied to oil marketing companies under the fuel blending programme.
The move comes as the government expands its ethanol blending initiative by allowing surplus FCI rice stocks to be used as a feedstock. The rice allocation for ethanol production has increased from 55 lakh tonnes in the current ethanol supply year to 72 lakh tonnes for 2026-27.
FCI procures rice from farmers under an open-ended procurement system, particularly from states such as Punjab, Haryana, Telangana, Uttar Pradesh and Chhattisgarh. However, procurement has frequently exceeded the requirements of the Public Distribution System and welfare schemes, leaving government warehouses with stocks well above buffer norms.
The parliamentary reply also revealed that two cases of diversion of FCI rice allocated for ethanol production were detected. State food departments took action against the concerned distilleries, and FCI stopped further allocations to them. The names of the distilleries were not disclosed.