FCI sold rice to ethanol distilleries nearly 40% below acquisition cost.
It supplied 6.35 million tonnes worth ₹14,596.78 crore in 12 months.
Haryana and Uttar Pradesh were among the largest recipients of FCI rice.
The Food Corporation of India (FCI) supplied rice to ethanol distilleries at prices nearly 40% below its average acquisition cost between June 2025 and June 2026, according to a written reply in the Rajya Sabha.
Minister of State for Consumer Affairs, Food and Public Distribution Nimuben Jayantibhai Bambhaniya, responding to a question from MP Ashok Singh, said FCI dispatched 6.35 million tonnes of rice valued at ₹14,596.78 crore from its warehouses to ethanol producers during the 12-month period.
Among the largest recipients, Haryana received 844,141 tonnes, followed closely by Uttar Pradesh with 838,645 tonnes. Punjab and Himachal Pradesh together received 658,952 tonnes, while West Bengal accounted for 584,672 tonnes and Madhya Pradesh for 432,485 tonnes.
Under the Open Market Sale Scheme (Domestic), or OMSS(D), rice meant for ethanol production was priced at ₹2,250 per quintal between June and October 2025. The rate was increased to ₹2,320 per quintal for the period from November 2025 to October 2026. For November 2026 to June 2027, the government has fixed the price at ₹2,390 per quintal.
These rates were substantially lower than FCI's average acquisition cost. According to the parliamentary reply, the corporation's acquisition cost stood at ₹3,719.72 per quintal in 2024-25 and rose to ₹3,889.46 per quintal in 2025-26, based on revised estimates.
Acquisition cost refers to the expenditure incurred by FCI while procuring rice from farmers. The economic cost is higher as it also factors in expenses such as storage, transportation and carrying costs incurred before the grain is distributed or sold.
Despite the difference between the acquisition cost and the price charged to ethanol producers, the government maintained that no subsidy was being provided to distilleries. It said the grain was being sold at the notified OMSS(D) price. The reply, however, did not elaborate on how the gap between FCI's acquisition cost and the sale price was being accounted for.
The government also disclosed that two instances of diversion of FCI rice allocated for ethanol production had been detected.
According to Bambhaniya's reply, the respective state food departments initiated action against the two distilleries involved, while FCI stopped further rice allocations to them. The names of the distilleries were not disclosed in the parliamentary response.
The disclosure comes at a time when the Centre is seeking to increase ethanol blending in petrol by allowing a wider range of feedstocks, including surplus rice available with FCI.
For the 2026-27 ethanol supply year, which runs from November to October, the government has allocated 7.2 million tonnes of rice for ethanol production. This is higher than the 5.5 million tonnes allocated in the current supply year. The grain will be supplied at ₹2,390 per quintal during the notified period, according to Department of Food and Public Distribution notifications.
FCI procures rice at the minimum support price under an open-ended procurement system, meaning eligible quantities offered by farmers in major producing states such as Punjab, Haryana, Telangana, Uttar Pradesh and Chhattisgarh are purchased by the government agency.
