In a significant move aimed at boosting India’s Ethanol Blended Petrol (EBP) programme, the Union Government has approved. An additional 2.8 million tonnes of Food Corporation of India (FCI) rice for ethanol production. This decision raises the total rice allocation for the ethanol supply year 2024-25 to 5.2 million tonnes, which runs until October 2025.
Despite concerns surrounding food security, this move has sparked interest across industries. Here’s a breakdown of what this approval means for India’s ethanol industry, food grain supply, and economic implications.
Why the Government Approved More Rice for Ethanol Production?
The decision was made after a comprehensive evaluation by the Ministry of Consumer Affairs, Food, and Public Distribution. Based on raw material availability and the potential ethanol yield from FCI rice stocks. This increase in rice allocation aligns with the government’s ongoing efforts to reduce dependency on imported fossil fuels and promote sustainable energy sources.
- Previous Allocation: Initially, 2.4 million tonnes of rice were approved for the EBP programme.
- New Allocation: An additional 2.8 million tonnes, raising the total to 5.2 million tonnes for the current ethanol supply year (ESY) 2024-25.
This expanded rice allocation will allow distilleries to produce around 2.45 billion litres of ethanol using a conversion rate of 470 litres per tonne. The decision is expected to provide significant support to India’s energy transition, in line with the country’s ethanol blending targets.
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Economic Implications: Costs, Subsidies, and Revenue
Despite the increased allocation, the issue price of FCI rice for distilleries remains at ₹22.50 per kilogram. Here’s a closer look at the economic impact of this move:
- Government Subsidy: The subsidy for this allocation is estimated at around ₹10,000 crore. Moreover, this is based on the economic cost of rice at ₹41.73 per kg for 2025-26 and a subsidy of ₹19.23 per kg.
- Revenue from Ethanol: Distilleries will pay about 11,700 crore for the rice, and earn about 14,300 crore by selling ethanol to oil marketing companies at a government subsidy rate of ₹58.50 per litre.
Impact on Food Security and Rice Prices
However, food security and the diversion of essential grains are concerns about ethanol production. Rice, a staple in India, along with sugarcane and maize, forms the backbone of the country’s food systems. The diversion of these crops for biofuel production could impact food availability and Indian rice prices.
Ethanol Blending Programme: Achievements and Future Goals
The EBP programme has already exceeded its target blending rate of 18%, reaching over 18.5% from November 2024 to April 2025. The government’s ultimate goal is to achieve 20% ethanol blending in petrol by the end of ESY 2025-26.
This goal reflects India’s broader ambitions to reduce its reliance on imported fuels and ensure cleaner, more sustainable energy solutions. However, achieving this target will require continuous support for biofuel production, balanced with measures to safeguard the nation’s food security.
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Conclusion: Weighing the Benefits and Challenges
The government’s decision to approve additional rice for ethanol production has both economic and environmental benefits. Particularly in terms of boosting India’s biofuel production capacity and helping reduce air pollution. However, it also raises concerns about the impact on food grains availability and the need to maintain a balance between energy production and food security.
India is navigating a complex landscape where sustainable energy solutions and food security must be managed carefully. Furthermore, as India moves toward higher ethanol blending levels, strategic policy decisions will be crucial for meeting energy and food needs sustainably.
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