More Stories

Informist, Wednesday, Feb. 5, 2025

 

By Afra Abubacker

 

NEW DELHI – Food Corp. of India is likely to begin selling the surplus rice at its godowns to distillers for ethanol production from Feb. 15, an FCI official said. Apart from helping the agency liquidate its huge stocks of the cereal, the move will make room for rabi procurement starting April, the official added. FCI had 29.1 million tonnes of rice as of Jan. 1, the highest opening stock for the month in a decade. 

 

"We expect BPCL (Bharat Petroleum Corporation Ltd.) to give (ethanol supply) allocations by Feb. 15. Parties (distillers) will have to carry their allotment letters and coordinate with regional officials," the official said.

 

Distillers use rice procured from FCI to manufacture ethanol and sell the biofuel to oil marketing companies. On behalf of state-owned oil marketing companies, BPCL invites distilleries to bid for ethanol supplies. On Jan. 29, oil companies floated a tender for the supply of 1.24 billion litres of ethanol made from FCI surplus rice and C-heavy molasses. The tender closed on Wednesday. Ethanol is made from starch-containing feedstocks like molasses and grains. 

 

Asked about rice offtake, the FCI official said that last year, ethanol making units lifted only 1.38 million tonnes, or 40.6% of the offered quantity. However, he is "optimistic" that distillers will actively lift rice from government godowns this year. The government has asked FCI to sell 2.4 million tonnes of rice for ethanol production in the 2024-25 ethanol supply year (Nov-Oct), against 3.4 million tonnes allocated last year. 

 

In July 2023, FCI had halted rice supply to distillers amid concerns over lower production. The ban was lifted in August 2024, but FCI is yet to start selling rice for ethanol production, as oil companies are yet to give allocations. 

 

To clear stocks, the government has asked FCI to sell rice to distillers at a subsidised rate of INR 22.50 per kg, way below the economic cost of INR 39.75 per kg. "The government has asked to sell the oldest stock available in godowns to distillers," the official said. Some godowns are likely to have stocks procured 2–3 years ago, he added. 

 

Since India has been supplying fortified rice since 2020 to address micronutrient deficiencies, distillers will receive fortified rice to make ethanol. FCI buys paddy from farmers and gets it custom-milled as per requirements. 

 

Distillers have to bear the transportation costs if stocks are moved from surplus godowns to deficit ones, the official said. Ethanol makers may move to other feedstocks like maize or damaged food grains if their prices are lower and margins higher than rice. While FCI rice is priced at INR 22.5 per kg, maize in Karnataka markets costs around INR 20-INR 24 per kg. Ethanol made from rice is priced at INR 58.50 a litre, and that from maize at INR 71.86 a litre. Oil companies buy ethanol to blend it with petrol and achieve blending targets. The government has set a target of achieving 20% blending by 2025-26 (Nov-Oct) to reduce dependence on crude oil and save foreign exchange. As of December, India achieved 16.4% blending in 2024-25.

 

"Distillers can lift the allotted rice at their convenience. But if they can lift it in one go, the better for FCI," the official said. Distillers are given time till Jun. 30 to lift rice from godowns, he added. 

 

In a bid to offload its swelling stocks, FCI has started selling rice twice a week--Wednesday and Thursday--since January under the open market sales scheme. Previously, FCI sold rice only on Wednesdays. However, the offtake remains poor amid the availability of new paddy crop across the country. Since August, FCI has sold only 1.16 million tonnes, or nearly 35% of the 3.34 million tonnes rice offered, FCI data showed. 

 

Though the government disposes some rice stocks by selling them under the brand "Bharat rice", the official said the offtake for Bharat rice is slow. Lifting has been tepid due to the poor supply chain of government agencies--National Agricultural Cooperative Marketing Federation of India, and National Cooperative Consumers' Federation of India, he added. Bharat rice is sold at a subsidised rate of INR 34 a kg. 

 

Asked about FCI losses on the back of surplus stocks, the official said, "Our inflow of grains is unlimited, while outflow is limited." The agency's procurement activities are open-ended as it has to procure all the paddy that a farmer brings at the minimum support price. Meanwhile, the offtake or demand is limited to welfare scheme requirements, open market sales, and the ethanol manufacturing program. "FCI needs more disposal channels to offload foodgrains," he said. 

 

Amid high paddy production, FCI has scaled up its kharif rice procurement target to 49.56 million tonnes in 2024-25 from 48.50 million tonnes earlier. India is expected to have a record kharif rice production of 119.9 million tonnes in 2024-25. "Though there are space constraints, FCI is regularly reviewing and handling it," another FCI official said.  End

 

Edited by Tanima Banerjee

 

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.