Govt allows FCI to sell rice to ethanol makers at Rs 22.5/kg; tender for 110 crore liters to follow soon

In a significant policy decision to support grain-based ethanol producers, the Central Government has revised its Open Market Sale Scheme (Domestic) (OMSS – D) Policy for 2024-25 under which it has reduced the price of rice sold to distilleries for ethanol production. The reserve price for rice has been set at ₹2,250 per quintal pan-India from Food Corporation of India (FCI), a decrease from the previous price of ₹2,800 per quintal.

The sale of FCI rice for ethanol production will be restricted to distilleries registered with Oil Marketing Companies (OMCs) as ethanol suppliers. To access the rice, distilleries must present a signed contract with OMCs at their chosen FCI depot. Allocation will be based on the ethanol quantities specified in these contracts. The OMCs will monitor and report the ethanol output from FCI rice at respective depots on a monthly basis.

The government has capped the total quantity of rice available for ethanol production at 24 lakh tonnes (LT), with a preference for using old rice stocks wherever feasible. To support this initiative, the Ministry has directed that the third ethanol procurement tender for approximately 110 crore litres during 2024-25 should prioritize FCI rice, particularly older stocks. As per the experts, the oil marketing companies are expected to issue the tender for ethanol procurement this week.

For state governments, state government corporations, and community kitchens, the reserve price of rice has also been set at ₹2,250 per quintal, and these entities can procure rice without participating in e-auctions. The revised OMSS(D) Policy for 2024-25 will remain valid until June 30, 2025.

Boost to Ethanol Production

In August 2024, the government lifted the 2023 ban on rice sales for ethanol production, permitting the purchase of 23 lakh tonnes of rice between August and October 2024 through e-auctions under the OMSS. However, ethanol manufacturers cited the earlier price as financially unviable, resulting in low uptake.

The price reduction for FCI rice is expected to significantly enhance ethanol production. During the current Ethanol Supply Year (ESY) 2024-25, allocations for ethanol supply (Cycles 1 and 2) have reached approximately 930 crore litres. Ethanol blending in petrol achieved 18.2% in December 2024, with cumulative blending from November to December reaching 16.4%. Union Transport Minister Nitin Gadkari has announced that India is on track to achieve the 20% ethanol blending target within the next two months, well ahead of schedule.

Following the government’s announcement, shares of ethanol producers and distilleries surged. For instance, Globus Spirits Ltd saw a 17% rise in stock prices on Monday, January 20.

This policy revision underscores the government’s commitment to bolstering ethanol production and achieving its energy transition goals, while providing economic relief to the ethanol industry.