New Delhi: The Centre’s revised standard operating procedure (SOP) for the sale of Food Corporation of India (FCI) rice to ethanol distilleries is expected to support India’s ethanol blending programme while helping reduce record government grain stocks, according to trade experts.
For the 2026-27 ethanol supply year (ESY), the government has allocated 7.2 million tonnes (MT) of FCI rice for ethanol production, up from 5.5 MT in the previous year. In addition, 5.5 MT of 100% broken rice has been earmarked for sale through e-auctions, with ethanol producers eligible to procure the grain, The Hindu Businessline reported.
Earlier this month, the Centre fixed the issue price of FCI rice for ethanol production at ₹2,320 per quintal until October 31, after which it will increase to ₹2,390 per quintal from November 1.
Industry experts said the higher allocation would help ensure a stable supply of feedstock for ethanol production, supporting the government’s target of achieving 20% ethanol blending (E20) while creating a productive use for ageing rice stocks.
“Earlier, old rice had limited commercial value. Now, it has become an industrial raw material for ethanol,” said New Delhi-based exporter Rajesh Paharia Jain.
The policy comes at a time when FCI is holding record grain inventories. Government warehouses currently store about 40.3 MT of rice and paddy, equivalent to around 38.74 MT of rice, following a record harvest in the 2025-26 crop year. Wheat stocks have also climbed to a five-year high of 52.2 MT.
Trade experts said diverting surplus and broken rice for ethanol production would improve inventory management, lower storage costs and reduce wastage while maintaining adequate food security reserves.
The revised SOP is also expected to improve the availability of feedstock for ethanol manufacturers by easing pressure on the market for low-grade and rejected rice, prices of which have risen amid higher maize prices. Additional supplies under the Open Market Sale Scheme (OMSS) could help stabilise feedstock availability, industry participants said.
However, some exporters cautioned that larger diversion of rice to ethanol production could reduce the availability of non-basmati rice for export, particularly to price-sensitive markets in Africa and Southeast Asia. They said higher domestic prices could benefit competing exporters such as Pakistan, Vietnam and Myanmar.
Industry observers said the long-term success of the revised policy would depend on balancing the objectives of expanding ethanol production, maintaining food security and preserving India’s competitiveness in global rice export markets.
