Oil marketing companies this week are expected to float tender under Cycle 3 (C3) for the supply of about 110 crore litres of ethanol during ESY2024-25 (November-October) which has been restricted only to ethanol to be produced from the subsidised rice of the Food Corporation of India (FCI) to be sold at ₹22.50/kg. The government has also fixed maximum quota of 24 lakh tonnes (lt) for FCI to sell to ethanol distilleries.

Last week, the government lowered the issue price of rice to be sold to distilleries for making ethanol to ₹22.50/kg, as against the economic cost of ₹39.75/kg, effectively subsidising ₹17.25/kg from public exchequer. On January 7, the government had told the FCI to sell rice at a fixed price of ₹28/kg to ethanol producers.

Notifying the reduction in FCI rice price, the government has also said that conversion may be allowed in case of shortage in supply of ethanol produced from maize/other category of feedstock, as already allotted during ESY 2024-25. The shortfall may be allotted to ethanol produced using FCI rice, it said.

Industry officials while welcoming the announcement said that if any distillery finds difficulties in sourcing maize of broken rice from open market at a desired rate, that unit will have the liberty to shift to FCI rice and supply ethanol accordingly.

Based on a conversion of 470 litre from 1 tonne of FCI rice, distilleries can produce about 112-113 crore litres of ethanol from 24 lt quota, for which the government subsidy is estimated to be about ₹4,140 crore. However, the subsidy amount may be lower as FCI has been asked to sell old rice of previous years first and their economic costs are marginally less from 2024-25.

The government has also said that supply of FCI rice can be availed by ethanol distilleries in both deficit and surplus states all through the year. As per the conditions set for ethanol distilleries eligible to buy rice from FCI, it is allowed to only those units registered with OMCs as suppliers of ethanol.

The food ministry has asked distilleries to approach the FCI depot of their choice along with a copy of signed contract with OMCs, but clarified that FCI will allocate the rice as per the quantity of ethanol allocated to distilleries in their contract with OMCs. Distilleries have been told to provide a copy of certificate issued by OMCs regarding supply of ethanol.

The OMCs have also been asked to furnish details of quantity of ethanol produced from FCI rice, received at respective depot every month to the food ministry.

Besides ethanol, the Centre on January 17 also reduced the reserve price of FCI rice under the Open Market Sale Scheme (OMSS) by ₹550 per quintal to ₹2,250 for states to support food security measures.

According to the Order, issued by Food Ministry, state governments and state-run corporations can purchase up to 12 lt at the revised rate. The previous reserve price was ₹2,800 per quintal. The FCI, which has also been selling rice through weekly e-auctions, will implement the revised policy until June 30, 2025.

But, private traders and cooperatives will continue to pay ₹2,800 per quintal, while central cooperatives like Nafed, NCCF and Kendriya Bhandar selling under the ‘Bharat’ brand will pay ₹2,400 per quintal.

The sale of rice to states under OMSS is restricted to non-surplus regions requiring additional supplies. The ‘Bharat’ brand rice sales to private millers are not permitted but are allowed for hostels, religious institutions, hospitals and charitable organisations.

The Central Pool stock of rice had 18 per cent higher at 610 lt (including 476.28 lt of paddy in terms of rice) as on January 1, 2025 as against 516.5 lt year-ago.