The Cabinet Committee on Economic Affairs (CCEA) last week approved a new scheme, Rice Milling Transformation (RMT), under which the share of broken grain in rice supplied from the Food Corporation of India (FCI) stock has been reduced. For raw (white) rice, the broken rice share has been cut from 25% to 10%; for parboiled rice, it has been reduced from 16% to 5%, according to a report by The Hindu BusinessLine.
Record Foodgrain Stockpile Drives Policy Change
The government holds a record high of 122.64 million tonnes (mt) of foodgrain stock in the Central Pool as of June 1. This includes 68.34 mt of rice (comprising 42.84 mt of paddy), 53.41 mt of wheat, and 0.9 mt of coarse grains. Some grains are lying in the open and require immediate evacuation. The new scheme will allow the government to transfer the maximum quantity out of the 42.84 mt of paddy to millers. Additionally, the government will not have to lift 15% of broken rice separated during processing, which can translate to saving space for about 4 mt. The broken rice, though still under government account, will be sold from the premises of rice millers, helping the government save on transport costs.
How the Scheme Differs from the Andhra Pradesh Pilot
In Andhra Pradesh, a pilot scheme was run under which broken rice was left with millers. In return, millers were compensated with an incentive of ₹110/quintal. Under that pilot, millers were required to deposit 67 kg of rice containing 10% broken grain from processing 100 kg of paddy, as per norms. Previously, 67 kg of rice contained 16.75 kg of broken rice (@25%). Under the new RMT scheme, millers will deliver 57 kg (including nearly 7 kg of broken grain @10%) to FCI and retain 10 kg, which will later be auctioned by FCI.
Phase I Allocation Details
The government has allocated 50 lakh tonnes (lt) of rice under Phase I, comprising 37.5 lt of raw rice and 12.5 lt of parboiled rice. State-wise allocation is as follows:
| State | Raw Rice (lt) | Parboiled Rice (lt) | Total (lt) |
|---|---|---|---|
| Punjab | 14 | 0 | 14 |
| Andhra Pradesh | 10.5 | 2 | 12.5 |
| Haryana | 8 | 0 | 8 |
| Chhattisgarh | 3 | 0 | 3 |
| Madhya Pradesh | 1 | 0 | 1 |
| Odisha | 1 | 7 | 8 |
| Telangana | 0 | 3.5 | 3.5 |
Impact on Ethanol Distilleries
The government has announced an open market sale scheme (OMSS) policy under which the 15% separated broken rice will be auctioned from rice millers’ premises at a base price of ₹20/kg. This price is lower than the separate price of ₹23.20/kg announced for ethanol distilleries. If a distillery participates in the auction directly or through an agent, it may acquire broken rice at ₹20-21/kg from a nearby mill, reducing its cost of production. Oil marketing companies purchase ethanol at a higher rate when the biofuel is made from open-market rice compared to rice sourced from the government’s rice-for-ethanol programme, potentially improving distillery margins.
For commodity traders and procurement professionals, the reduction in broken rice content in PDS rice will increase the supply of low-grade rice available for industrial use, particularly ethanol production, at a lower price point. The phased allocation and the OMSS auction mechanism provide a transparent channel for acquiring discounted broken rice, which may affect spot prices for feed and industrial rice grades. Monitoring the auction results and state-level uptake will be key to assessing market impact.
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