Surge In Rice Supply For Ethanol Production, Prompts Halt On Open Market Sale Of FCI Rice To States

According to the latest data from the Food Corporation of India (FCI), the monthly supply of rice for ethanol production reached a record high of 2.77 lakh metric tonnes in June 2023.

This brings the total quantity of rice supplied to distilleries for this purpose to 24 lakh tonnes in less than three years.

In June 2023, a total of 2,77,419.98 metric tonnes (MT) of rice was supplied for ethanol production, which is a significant increase of 216% compared to the 87,778.81 MT supplied in the same month of 2022.

In May 2023, the monthly quantity of rice supplied for ethanol production was 2.95 lakh MT.

The monthly figure of rice supplied for ethanol production in June 2023 is the highest since the Ethanol Supply Year 2020-21, when the government started utilizing surplus rice stock from the central pool by FCI for conversion into ethanol.

According to reports, the government plans to supply a total of 32 lakh MT rice for ethanol in the Ethanol Supply Year 2022-23. As of June, 13 lakh MT has already been supplied, with the remaining 19 lakh MT scheduled to be provided by November this year.

The Ethanol Supply Year starts on December 1 of a calendar year and ends on November 30 of the following year.

In March 2020, the government decided to supply FCI rice to distilleries for ethanol production at a rate of Rs 2,250 per quintal under the Open Market Sale Scheme (Domestic). The rate was later reduced to Rs 2,000 per quintal in December 2020, and it has remained the same since then.

The price at which rice is supplied for ethanol production is significantly lower than the economic cost incurred by FCI for procurement and storage operations. The cost per quintal in previous years was Rs 3,939.26 in 2020-21, Rs 3,562.49 in 2021-22, Rs 3,858.19 in 2022-23 (revised estimates), and Rs 3,918.05 in 2023-24 (BE).

Since December 2020, the FCI has supplied over 24 lakh MT of rice to distilleries for the purpose of making ethanol.

Out of the total 24 lakh MT of rice supplied to distilleries for ethanol production, the highest quantity of 1.67 lakh MT was purchased by Chandigarh Distillers & Bottlers Ltd. This was followed by Bihar Distilleries and Bottlers Pvt Ltd with 1.57 lakh MT, and BCL Industries Ltd with 0.13 lakh MT, as stated in the minister's written reply to a question by Telugu Desam Party MP Jayadev Galla.

According to Minister of State Sadhvi Niranjan Jyoti, the FCI has generated revenue of Rs 4,844 crore by selling surplus rice for the production of ethanol since December 2020.

The monthly supply of rice for ethanol has increased, coinciding with requests from several states, including Karnataka, for rice under the Open Market Sale Scheme-Domestic (OMSS).

However, the India Meteorological Department has predicted a deficiency in rainfall due to El Nino, which could potentially impact the production of Kharif crops in the country.

To control inflation and maintain sufficient stock levels for distribution under the National Food Security Act and other welfare schemes, the sale of wheat and rice under the Open Market Sale Scheme (Domestic) has been discontinued for state governments, including Tamil Nadu, effective from June 13, 2023.

In response to requests from the state governments of Karnataka, West Bengal, and Tamil Nadu for wheat and rice under the OMSS(D) Policy, the discontinuation of sale of wheat and rice to states under OMSS(D) in 2023 prevented their requests from being fulfilled.

With immediate effect, the Centre had also prohibited the export of non-basmati white rice by amending the export policy. This decision was made on July 20, aiming to ensure sufficient domestic supply of the cereal variety.

The Indian government has made changes to the Export Policy for non-basmati white rice in order to address concerns about its availability and rising prices in the domestic market. The previous policy allowed for the export of this variety with a 20% duty, but it has now been prohibited with immediate effect.

According to the Ministry, the retail prices of rice in India have seen an increase of 11.5% over the past year and 3% in the last month. These price hikes have contributed to the decision to restrict the export of non-basmati white rice.