NEW DELHI — The Food Corporation of India (FCI) has firmly rejected allegations of a ₹1,160 crore rice diversion for ethanol production in Madhya Pradesh, clarifying that the figure represents the legal value of surplus rice supplied to distilleries under the government’s ethanol blending programme. The statement, issued on Tuesday, comes amid growing concerns over the use of food grains for biofuel production at a time when global food security remains fragile and domestic agricultural output faces climate-related uncertainties.
The FCI’s clarification underscores the tension between India’s ambitious renewable energy goals and its obligation to ensure food availability for its 1.4 billion citizens. While the government frames the ethanol programme as a strategic move to reduce fuel imports and support farmers, critics warn that diverting food grains—even surplus stocks—could exacerbate supply chain vulnerabilities, particularly in drought-prone regions like Madhya Pradesh.
What Happened?
The controversy erupted after reports suggested that rice allocated for public distribution had been illegally diverted to ethanol production, triggering accusations of mismanagement and potential food security risks. The FCI, however, stated that the ₹1,160 crore figure corresponds to the market value of rice supplied to distilleries under the Centre’s ethanol policy, not an unauthorized transfer.
In its statement, the FCI emphasized that the rice in question was surplus stock, procured through standard channels and not earmarked for welfare schemes such as the Public Distribution System (PDS) or the National Food Security Act (NFSA). The corporation also clarified that the allocation followed established procurement and distribution protocols, with no evidence of procedural violations.
The ethanol blending programme, launched in 2018 and accelerated under the National Biofuel Policy, permits the use of surplus food grains—including rice, maize, and damaged wheat—for biofuel production. The policy aims to reduce India’s dependence on crude oil imports, which cost the exchequer over $120 billion annually, while providing an additional revenue stream for farmers.
Why It Matters
The FCI’s rebuttal highlights a broader policy dilemma: Can India afford to prioritize ethanol production over food security? The debate has gained urgency in recent months due to several factors:
1. Climate Vulnerabilities – Madhya Pradesh, a key agricultural state, has faced erratic monsoons and heatwaves, leading to fluctuating rice yields. In 2025, the state reported a 12% decline in kharif rice production compared to the previous year, raising concerns about buffer stock adequacy (Ministry of Agriculture, 2026).
2. Global Food Market Pressures – The war in Ukraine and export restrictions by major rice-producing nations have disrupted global supply chains, pushing domestic food inflation to a three-year high in early 2026. The Reserve Bank of India (RBI) has warned that food price volatility could derail economic recovery efforts (RBI Monetary Policy Report, April 2026).
3. Ethanol Targets vs. Food Stocks – The government has set an ambitious target of achieving 20% ethanol blending in petrol by 2025, up from the current 12%. To meet this goal, the Centre has increasingly relied on food grains, with rice accounting for nearly 30% of ethanol feedstock in 2025-26 (NITI Aayog, 2026). Critics argue that this shift could deplete buffer stocks, leaving the country vulnerable to supply shocks.
4. Political Fallout – Opposition parties, including the Indian National Congress, have seized on the controversy, accusing the Bharatiya Janata Party (BJP)-led government of prioritizing corporate interests over farmers and the poor. Congress leader Rahul Gandhi, in a recent rally in Madhya Pradesh, alleged that the ethanol policy was a “scam” designed to benefit “a handful of industrialists” (Congress Press Release, June 2026).
Background and Context
India’s ethanol blending programme was initially conceived as a way to utilize surplus sugar cane molasses, a byproduct of sugar production. However, as ethanol demand surged, the government expanded the programme to include food grains, particularly rice and maize, to meet blending targets.
Key milestones in the policy’s evolution:
– 2018: The National Biofuel Policy is launched, setting a 10% ethanol blending target by 2022.
– 2021: The government allows the use of surplus rice and maize for ethanol production amid record food grain stocks.
– 2023: The blending target is revised to 20% by 2025, with the Centre offering financial incentives to distilleries to procure food grains.
– 2025: The FCI reports that 2.5 million tonnes of rice were allocated for ethanol production, up from 1.2 million tonnes in 2023 (FCI Annual Report, 2025).
The policy has faced criticism from economists and agricultural experts, who argue that using food grains for fuel could distort market dynamics. A 2025 study by the Indian Council for Research on International Economic Relations (ICRIER) warned that the ethanol programme could lead to “unintended consequences,” including higher food prices and reduced availability of subsidized grains (ICRIER Working Paper, 2025).
Competing Claims and Uncertainty
The FCI’s clarification has not fully resolved the controversy, with stakeholders offering divergent interpretations of the data:
1. Government’s Position – The Ministry of Petroleum and Natural Gas has defended the ethanol programme, stating that it has saved ₹50,000 crore in foreign exchange since 2021 and provided an additional income source for farmers. Union Minister Hardeep Singh Puri has dismissed concerns about food security, arguing that India’s food grain stocks remain “comfortably above buffer norms” (Ministry of Petroleum, June 2026).
2. Critics’ Concerns – Agricultural economists and opposition leaders argue that the government’s reliance on food grains for ethanol is unsustainable. They point to the following risks:
– Stock Depletion: India’s rice buffer stocks stood at 23 million tonnes in June 2026, down from 31 million tonnes in 2023 (FCI Stock Position Report, 2026). While still above the required buffer norm of 13.5 million tonnes, the decline has raised alarms.
– Price Volatility: The diversion of rice for ethanol has contributed to a 15% increase in retail rice prices over the past year, disproportionately affecting low-income households (Consumer Affairs Ministry, 2026).
– Climate Risks: With erratic monsoons and rising temperatures, future rice production is uncertain. A 2026 report by the Indian Meteorological Department (IMD) projected a 20% decline in kharif rice output in key states, including Madhya Pradesh, due to delayed monsoons (IMD Climate Outlook, 2026).
3. Industry Perspective – Ethanol producers argue that the programme is essential for India’s energy security. The All India Distillers’ Association (AIDA) has lobbied for further liberalization of grain-based ethanol production, citing the sector’s potential to create 1 million jobs by 2030 (AIDA Policy Brief, 2026).
What to Watch Next
The controversy is likely to intensify in the coming months, with several key developments to monitor:
1. Parliamentary Debate – Opposition parties have demanded a parliamentary probe into the ethanol programme, with the Congress party threatening to disrupt proceedings until the government provides “transparent data” on grain allocations (Lok Sabha Bulletin, July 2026).
2. Judicial Scrutiny – A public interest litigation (PIL) filed in the Supreme Court in May 2026 seeks to halt the use of food grains for ethanol production, arguing that it violates the right to food under Article 21 of the Constitution. The court is expected to hear the case in September (Supreme Court Cause List, 2026).
3. Policy Revisions – The NITI Aayog is reportedly reviewing the ethanol blending policy, with a focus on reducing reliance on food grains. Sources indicate that the government may soon announce incentives for second-generation ethanol, produced from agricultural waste (NITI Aayog Internal Memo, June 2026).
4. State-Level Pushback – Madhya Pradesh Chief Minister Mohan Yadav has ordered a review of the state’s ethanol procurement contracts, citing concerns over “excessive” rice allocations. Similar reviews are underway in Punjab and Haryana (Madhya Pradesh CMO Press Note, July 2026).
5. Global Market Dynamics – India’s ethanol exports have surged in 2026, with the country emerging as the world’s third-largest supplier after the U.S. and Brazil. However, rising global food prices could lead to export restrictions, further complicating the domestic supply situation (UN Food and Agriculture Organization, 2026).
Conclusion
The FCI’s clarification on the ₹1,160 crore rice allocation for ethanol production has done little to quell the broader debate over India’s biofuel policy. While the government insists that the programme is a win-win for energy security and farmers, critics argue that the risks to food security are too great to ignore.
The coming months will be critical in determining whether India can strike a balance between its renewable energy ambitions and its obligation to feed its population. With parliamentary, judicial, and state-level scrutiny intensifying, the ethanol programme is poised to become a flashpoint in the larger discourse on sustainable development.
For now, the FCI’s statement serves as a reminder of the complexities inherent in India’s dual pursuit of energy independence and food security—a challenge that will require careful policy calibration in an era of climate uncertainty and geopolitical instability.
Story synopsis gathered from: [Hindustan Times](https://www.hindustantimes.com/india-news/govt-body-rejects-1-160-crore-rice-diversion-for-ethanol-in-madhya-pradesh-claim-101784006782106.html) — source.
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Story synopsis gathered from: Hindustan Times – India News — source.
