FCI Sold Rice Worth ₹14,597 Crore to Ethanol Plants at 40% Below Procurement Cost: Govt
Moneylife Digital Team 29 July 2026
The Food Corporation of India (FCI) supplied 6.35mn (million) tonnes of rice worth ₹14,596.78 crore to ethanol distilleries between June 2025 and June 2026, selling the grain at ₹2,250-₹2,320/quintal—around 40% below its average acquisition cost of ₹3,719.72-₹3,889.46/quintal, the Union government informed the Rajya Sabha.
 
Despite the wide gap between the sale price and procurement cost, the government maintained that no subsidy was being extended to ethanol producers, saying the rice was sold at the fixed price prescribed under the open market sale scheme (domestic) (OMSS(D)).
 
The disclosure came in a written reply by minister of state for consumer affairs, food and public distribution Nimuben Jayantibhai Bambhaniya to a question from Rajya Sabha member of Parliament (MP) Ashok Singh, who sought details of rice supplied from FCI warehouses to ethanol plants, the prices at which it was sold, whether any subsidy was being provided and whether any cases of diversion had been detected.
 
According to the reply, rice supplied to ethanol distilleries was priced at ₹2,250/quintal between June and October 2025 and ₹2,320/quintal from November 2025 to October 2026. The government has also fixed the sale price at ₹2,390/quintal for the period from November 2026 to June 2027 under the OMSS(D) policy.
 
In comparison, FCI's all-India average acquisition cost stood at ₹3,719.72/quintal in FY24-25 and ₹3,889.46/quintal in FY25-26, based on revised estimates.
 
The reply, however, did not explain why rice was being sold at prices substantially below its acquisition cost. It only stated that 'there is no subsidy being extended to ethanol producers for procurement of rice supplied for ethanol production', as sales are made at the fixed OMSS(D) price.
 
Haryana Received the Highest Allocation
State-wise data annexed to the reply show that Haryana received the largest quantity of FCI rice for ethanol production, at 844,141MT (metric tonnes), followed by Uttar Pradesh (838,645MT), Punjab and Himachal Pradesh combined (658,952MT), West Bengal (584,672MT) and Madhya Pradesh (432,485MT).
 
Overall, FCI dispatched 6,349,913MT (about 6.35mn tonnes) of rice valued at ₹14,596.78 crore during the 12-month period.
 
The parliamentary disclosure comes as the government continues to expand the use of surplus FCI rice for ethanol blending under its ethanol blending programme. At the same time, the Centre has imposed stock limits on sugar dealers to curb rising sugar prices, even as rice continues to be supplied to ethanol manufacturers at prices significantly below FCI's acquisition cost.
 
Two Diversion Cases Detected
The government also informed Parliament that two cases of diversion of FCI rice meant for ethanol production had been detected.
 
According to the reply, state food departments initiated action after irregularities were found in the movement of rice consignments involving two distilleries. FCI has also discontinued further allocation of rice to those distilleries. The government did not disclose their names.
 
The figures highlight the scale of the government's ethanol feedstock programme, under which surplus rice from central stocks is being diverted for fuel production. The data also underscore the significant gap between the price at which FCI procures rice from farmers and the price at which it supplies rice to ethanol manufacturers, even though the government maintains that such sales do not constitute a subsidy under the prevailing OMSS(D) policy.
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