India’s food ministry has ring-fenced 72 lakh tonnes (lt) of rice from Food Corporation of India (FCI) stocks for ethanol distilleries in the upcoming Ethanol Supply Year (ESY) 2026-27 (November 2026 to October 2027), according to a ministry communication to FCI on July 16. The allocation is up from 52 lt in the 2025-26 supply year, reflecting the government’s push to scale up grain-based ethanol production and meet higher blending targets.
Expanded Allocation and Pricing
The ministry approved the sale of 72 lt of rice at ₹2,390 per quintal to ethanol distilleries for ESY 2026-27. Additionally, 55 lt of 100% broken rice will be sold through open market e-auctions under the Rice Milling Transformation (RMT) scheme. On July 2, the government set a base reserve price of ₹2,000 per quintal for RMT rice, but a Dynamic Reserve Price (DRP) will be decided quarterly by a committee. Industry sources noted that since there is no restriction on the use of FCI’s broken rice sold via e-auction, it could be diverted for ethanol production, improving distillery economics.
Procurement Prices for Oil Marketing Companies
Oil marketing companies (OMCs) are mandated to procure ethanol made from FCI rice at ₹58.5 per litre, while ethanol from broken rice commands ₹64 per litre. With the additional broken rice allocation, OMCs may benefit from lower feedstock costs, making biofuel production more profitable.
Other Rice Allocations
The government has also earmarked:
| Category | Quantity (lt) | Price (₹/quintal) | Period |
|---|---|---|---|
| State governments and agencies (non-e-auction) | 16 | 2,320 | July–October 2026 |
| State governments and agencies (non-e-auction) | 32 | 2,390 | November 2026–June 2027 |
| Private parties and cooperatives (e-auction) | 25 | 2,660–2,890 (July–Oct) / 2,740–2,970 (Nov–June) | July–June |
| Small traders and entrepreneurs (within above) | — | 2,890 (July–Oct) / 2,970 (Nov–June) | July–June |
| Open market (10% broken) | 20 | 3,090 (July–Oct) / 3,180 (Nov–June) | July–June |
However, allocations for national cooperatives such as Nafed, NCCF, and Kendriya Bhandar for retail sale under the 'Bharat' brand have been deferred, with the ministry stating quantities “will be intimated in due course.”
Impact on Biofuel Blending Targets
The ethanol push comes as the government considers increasing the blending share of ethanol with petrol beyond the current 20%. Testing and trials are underway. Against annual ethanol production of nearly 2,000 crore litres, OMCs need 1,050–1,100 crore litres per year to meet the 20% blending target. Using FCI rice ensures steady supply even if sugarcane and maize production suffer due to a deficient monsoon, according to the ministry.
Broader Implications
This policy move signals India’s commitment to reducing dependence on imported fossil fuels. For commodity traders and analysts, the FCI rice allocation provides a floor for domestic grain prices but may also divert supply away from food markets. The ability to use broken rice at competitive e-auction prices could alter the cost dynamics for ethanol producers, while the deferred retail allocations suggest the government is prioritising biofuel over low-cost retail distribution for now.
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