Irony is one among the many a number of layers of India’s ethanol-blending programme. The federal government’s try at vitality safety is latched on to its meals safety system with parasitic hooks. Paddy, that the federal government buys on a minimal assist value (MSP) with taxpayers’ cash to distribute among the many poor, is being offered to distillers at half the fee.
It’s a bewildering case the place the completed product — rice, after transporting, milling and stocking — is being offered at even decrease than the procurement value of the supply product — paddy.
We’re going to let you know how that’s being performed and why we’re speaking in regards to the nationwide meals safety programme right here. We’re additionally going to let you know why the federal government is doing so.
The federal government says the nationwide Ethanol Blended Petrol (EBP) programme will assist cut back petroleum imports and save India’s foreign reserves. That ought to make sense as a result of India imports round 90% of its vitality wants. There’s only one small downside: the present economics do not assist the plan.
This economics is the first cause why the federal government is supplying “surplus” rice from the Meals Company of India (FCI) godowns to distillers producing ethanol.
The Ministry of Petroleum and Pure Gasoline in a press release on July 31 clarified that the EBP programme did not compromise India’s meals safety programme. Nevertheless, it sidestepped essential questions, the primary being: why was rice, purchased below India’s meals safety programme utilizing taxpayers’ cash, being given to distillers at a subsidised price?
“In a rustic the place 80 crore folks rely upon free rations, the diversion of any merchandise that can be utilized as meals to provide ethanol is an enormous sacrifice. Meals can’t be another vitality supply in a rustic like India,” agriculture knowledgeable and Lucknow College professor Sudhir Panwar instructed India Immediately Digital.
INDIA’S ETHANOL PROGRAMME AND CEA NAGESWARAN’S WORD OF CAUTION
Whereas the necessity to minimize petroleum imports is comprehensible, the frenzy to take action with ethanol-blended petrol is not.
The federal government has mandated the sale of E20 petrol, which is a mixture of 20% ethanol in a litre of petrol. Whereas the deadline was set for 2030, the capability to provide sufficient ethanol for mixing with petrol was achieved by 2025, 5 years forward of schedule.
That was at the same time as 80% of the automobiles on the street weren’t E20 appropriate.
In an Op-Ed article printed in The Indian Specific on August 17, India’s Chief Financial Advisor (CEA) V Anantha Nageswaran argued that E10 petrol ought to be made out there for older automobiles.
Nageswaran’s piece, co-authored with Division of Financial Affairs advisor Akash Poojari, additionally means that India should not transfer past the E20 till India has “thoroughly costed the food-versus-fuel trade-off“.
The federal government was shifting in the direction of E25 and better ethanol blends, and paused solely after public backlash. CEA Nageswaran is cautioning towards speeding in the direction of greater blends as a result of some strikes round agriculture sample and distillery capability could be troublesome to undo.
One of many causes the federal government is below stress on the EBP programme is that it has already installed hundreds of factories to produce ethanol.
Investments had been made, and large financial institution loans had been taken out to construct these vegetation. The repayments clock is ticking and traders and bankers may discover the watch for a gradual transfer to greater ethanol blends troublesome.
HOW DID INDIA GET 700 CRORE LITRES OF ETHANOL SURPLUS CAPACITY?
India’s ethanol manufacturing capability expanded from about 421 crore litres in 2014 to just about 2,000 crore litres by 2026. The spirited sprint has made India sit on a notional surplus capacity of 700 crore litres of ethanol. Which means, it might probably produce greater than it might probably use.
There are 370 operational distilleries whereas 40 others are developing, exhibits knowledge shared by the All India Distillers’ Affiliation (AIDA) with India Immediately Digital.
Now, ethanol is a biofuel, which suggests there’s a farm element to it. Whereas the scope of growth of factories is nearly limitless, a gradual provide of feedstock, which is agriculture dependent, and subsequently not limitless, needs to be maintained. The enter value of the feedstock needs to be factored in too.
WHAT FEEDSTOCK ARE INDIA’S ETHANOL FACTORIES BEING RUN ON?
Whereas molasses and rotten rice had been earlier used to make ethanol, the feedstock has now modified to incorporate millets (corn) and even rice.
Going by the present pattern, grain-based ethanol is 67% of the entire provide whereas the remainder is from sugarcane-based feedstock. This exhibits “the strategic position of grain in sustaining India’s ethanol mixing programme,” stated AIDA.
AIDA president Vijendra Singh instructed India Immediately Digital that the federal government has mandated ethanol distillers to supply a minimum of 40% of their feedstock from surplus rice shares held by the FCI.
Singh stated distillers independently procure feedstock equivalent to maize (corn) and sugarcane, whereas the federal government provides damaged rice.
“The FCI has an enormous rice surplus, together with damaged rice that isn’t fit to be eaten, mendacity in its warehouses. The federal government has restricted avenues for disposing of it, and that’s the reason it has mandated that 40% of ethanol manufacturing should come from surplus FCI rice,” AIDA’s Singh instructed India Immediately Digital.
However consultants say damaged rice is completely positive for consumption. Additionally bear in mind, the damaged rice being supplied to the distillers had been procured by the federal government via the FCI as a part of India’s Nationwide Meals Safety And Vitamin Mission.
WHAT’S INDIA’S NATIONAL FOOD SECURITY AND NUTRITION MISSION?
India’s historic reminiscence is scarred by famines by which millions of people have been killed. An Impartial India inherited meals shortage and used to dwell from assist ship to mouth. Contaminated wheat, particularly from the US, was the hallmark of the largesse of the West.
Within the Sixties, India launched the Inexperienced Revolution below scientist MS Swaminathan. The rise in grain manufacturing, significantly in Punjab, Haryana and Uttar Pradesh, turned India right into a food-surplus nation. Cultivation of paddy and wheat, the staples, was inspired as India constructed a buffer stockpile in FCI godowns.
India launched the Nationwide Meals Safety Mission (NFSM) in 2007-08 to extend the manufacturing of rice, wheat, and pulses. The NFSM was rebranded Nationwide Meals Safety and Vitamin Mission (NFSNM) in 2014-15.
The Manmohan Singh authorities in September 2013, brought the National Food Security Act (NFSA), a landmark legislation that was geared toward making certain meals and dietary safety for all in India.
Whereas the federal government tries to spice up foodgrain manufacturing below NFSNM, it ensures their equitable distribution below the NFSA.
So, India’s meals safety programme has two dimensions — procurement and distribution. Foodgrain, particularly paddy and wheat, is purchased under the minimum support price (MSP) system from farmers and distributed via honest value or ration retailers.
Round 800 million folks in India get free meals grains. Each month, 5 kg of grain, of which two-thirds is rice, is given to folks under the poverty line.
HOW GOVERNMENT SUBSIDISED RICE FOR ETHANOL PRODUCERS
In only one 12 months, (Kharif Advertising and marketing Season 2024-25), the federal government spent Rs 65,695 crore on paddy procurement.
The federal government provided that paddy, purchased utilizing taxpayer’s cash, to ethanol distillers at round 40% decrease than its acquisition value. This was revealed in a solution by the Ministry of Shopper Affairs and Meals and Public Distribution Division within the Rajya Sabha on July 28.
The FCI spent Rs 3,889 per quintal (Rs 38.89/kg) on paddy procurement in 2025-26. The associated fee contains storage, transport and carrying expenses. Estimates by consultants like Ashok Gulati put that at a better Rs 44 per kg.
Nevertheless, the rice was offered at Rs 2,320 per quintal (Rs 23.20/kg) on a mean to distilleries for the manufacturing of ethanol. This can be a distinction of virtually Rs 1,600 per quintal or Rs 16 per kg.
The federal government’s justification is that the rice is damaged or broken, and unfit for consumption.
BROKEN RICE FIT FOR CONSUMPTION, BEING DIVERTED, SAYS EXPERT
Agriculture knowledgeable Sudhir Panwar stated rice being damaged would not make it unfit for consumption. “The nutrient composition of damaged rice stays the identical. It’s simply that the aesthetic adjustments,” he defined.
“Damaged rice fashioned a much bigger a part of the general public distribution system. No meals went to waste. No matter damaged rice was left, was given to African international locations as humanitarian assist,” he added.
Panwar says the share of foodgrains within the manufacturing of ethanol in India is growing quickly yearly, and must be weighed towards the trade-offs like water use and farmland dedication.
The damaged rice logic is most certainly getting used to make the damaged ethanol-blending mannequin limp.
OIL COMPANIES PAYING MORE FOR ETHANOL THAN FOR CRUDE?
At Rs 60.32 a litre, ethanol constructed from surplus FCI rice is the most cost effective, knowledge from the Ministry of Petroleum and Pure Gasoline reveals. Ethanol from corn prices Rs 71.86 a litre whereas it’s Rs 65.61 if produced from sugarcane.
The weighted common ex-mill value of ethanol stood at Rs 66.61 per litre, based on a reply within the Lok Sabha by the federal government on July 30.
Weigh this towards the price of petroleum imports at round Rs 48 a litre with crude at $91 a barrel. Add the processing price of Rs 7 to Rs 9, and the entire involves round Rs 55.
Mixing ethanol to petrol will flip “genuinely advantageous solely when crude climbs into the $120-130 [per barrel] vary or greater,” KBS Sidhu, former Particular Chief Secretary of Punjab, instructed Monetary Specific Digital.
Costs of Brent Crude hit $113 a barrel on April 7, on the peak of the Iran-US battle, and was at $86 on August 21. The $120-a-barrel situation is very unlikely now.
So, oil advertising firms (OMCs) are including costlier ethanol to cheaper petrol. If FCI rice is not supplied, the distinction will change into starker.
IS FCI RICE BEING USED TO WORK AROUND ETHANOL PROGRAMME ECONOMICS?
“If distillers begin shopping for rice from the open market at MSP, then the ethanol from that feedstock would be the costliest,” Panwar instructed India Immediately Digital.
“Earlier, 25% of damaged rice was allowed in PDS provide. The federal government is bringing it right down to 10%, retaining 15% unique damaged rice for the ethanol distilling trade,” he stated.
Meals Secretary Sanjeev Chopra stated in March {that a} Cupboard observe can be moved, proposing that the share of damaged rice in grains distributed via the PDS be introduced down from 25% to 10%.
Chopra stated that might make sure that ethanol distillers get 90 lakh tonnes of damaged rice yearly, based on a PTI report.
Panwar stated the FCI had created a brand new class and that’s unique damaged rice, 15% of which had been reserved for the ethanol distilling trade.
FOOD SECURITY AND ECONOMICS OF ETHANOL BLENDING
There are bigger problems with farmland being diverted and water-guzzling crops being planted due to the EBP programme.
The diversion of sugarcane to ethanol manufacturing is likely one of the the explanation why India, the world’s second-largest sugar exporter, is removing duty to import sugar. Diversion of maize has resulted in costlier eggs and poultry products. However that could be a story for an additional day.
Farmers, name them annadata, urjadata or the rest, aren’t gaining something past the MSP.
The federal government has rushed into the EBP programme and dedicated to creating an ethanol ecosystem with the maths not mathing. OMCs are already mixing costlier ethanol with cheaper petrol. Subsidised rice goes to provide costlier ethanol.
The larger query now’s: who’s subsidising whom?
Rice purchased with taxpayer’s cash is being offered at nearly half the value to distillers for a dream referred to as ethanol. And tens of millions of individuals in India are being compelled to make use of that blended petrol of their automobiles that are not E20-compliant. Who is definitely benefiting? Not the taxpayers for certain.
– Ends
