The Indian government’s revised standard operating procedure (SOP) for sale of rice to ethanol distilleries for the 2026-27 supply year (ESY) will ensure meeting the 20 per cent ethanol blending target, while utilising aged stocks better, say trade experts. According to New Delhi-based exporter Rajesh Paharia Jain, “Earlier, old rice had limited commercial value. Now, it has become an industrial raw material for ethanol.”
Price and Allocation Details
Earlier this month, the government fixed ₹2,320 per quintal for rice to be supplied for manufacturing ethanol till October 31. From November 1, it will be supplied at ₹2,390 per quintal. In addition, the Food Ministry has set aside 7.2 million tonnes (mt) from FCI stocks for distilleries for the 2026-27 season, up from 5.5 mt allocated last year. The Government has also allocated an additional 5.5 mt of 100 per cent broken rice for sale through e-auction. According to industry sources, ethanol producers can procure this, potentially making biofuel production more profitable.
| Component | Volume/Price | Period |
|---|---|---|
| Rice allocation for ethanol | 7.2 mt | 2026-27 ESY |
| Rice price till Oct 31 | ₹2,320/quintal | Up to Oct 31, 2026 |
| Rice price from Nov 1 | ₹2,390/quintal | From Nov 1, 2026 |
| Additional broken rice allocation | 5.5 mt | 2026-27 season |
Record FCI Stocks and Harvest Context
The decision comes on the heels of the FCI holding a record 40.3 mt of rice and paddy, which could yield 38.74 mt of rice. The FCI warehouses are overflowing with rice and wheat stocks after a record harvest in the 2025-26 crop year that ended in June. According to the article, rice production is estimated at a new high of 154 mt, while wheat output has been pegged at 120.6 mt. The FCI has 52.2 mt of wheat stocks, a five-year high.
Industry Reactions
Rajesh Paharia Jain said the surplus rice stocks could be liquidated systematically while maintaining buffer norms. He noted that “a transparent e-auction system will improve price discovery, while a separate allocation for ethanol provides long-term feedstock security.” He added that “priority to old and broken rice minimises wastage and improves inventory turnover” and that “support for Bharat brand will help stabilise retail prices and ensure food security.”
New Delhi-based trade analyst S Chandrasekaran said the current OMSS policy should be seen beyond commodity with the perspective of a holistic economic scenario and administering social welfare. “This policy is a major step towards benefiting the commoner during the geopolitical crisis,” he said.
M Madan Prakash, Director of Chennai-based Rajathi Group that deals with agricultural commodities, said the new SOP will help when prices of “rejected” rice in the open market are surging. “We used to trade in rejected rice, which has black coloured grains, uneven size and discolouration, which is not used for consumption. It was trading at ₹18 a kg till a month ago, but has increased to ₹21.50 now,” he said. The rise is mainly because of a surge in the price of maize (corn). Prices of maize, which were ruling below the minimum support price until a couple of weeks ago, have now surged to ₹27 a kg at the users’ end. “That way, the OMSS allocation will help,” said Prakash.
Potential Export Impact and Risks
Jain noted that FCI spends thousands of crores of rupees annually on storage and this current policy will ensure faster liquidation of stocks, reducing warehouse occupancy and storage losses. However, any large diversion of rice towards ethanol could affect exports. “The availability of non-basmati rice for exports may drop. It could affect India’s competitiveness in Africa and South-East Asia,” said the exporter, adding that Pakistan, Vietnam and Myanmar may become more competitive if Indian domestic prices rise.
A higher OMSS reserve price may lead to a rise in retail price of rice and its processing costs. It could distort the private market and could be a risk if the monsoon turns out to be weak and the government suspends OMSS sales. On the other hand, a hike in the OMSS price from November 1 will increase the procurement costs for the private trade.
S Chandrasekaran emphasised the balance: “From a national policy perspective, the notification is good because it prioritises food security, efficient FCI inventory management, and ethanol production while retaining the flexibility to protect exports.” The policy thus aims to navigate between supporting the ethanol blending mandate and safeguarding India’s position in global rice markets.
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