Centre Reserves 72 Lakh Tonne of FCI Rice for Ethanol Distilleries in ESY 2026-27
The food ministry has ring-fenced 72 lakh tonne of FCI rice for ethanol distilleries at ₹2,390/quintal, a sharp jump from 52 lakh tonne in 2025-26, while opening an additional 55 lakh tonne of broken rice through e-auction.
The short answer
India's food ministry has allocated 72 lakh tonne of rice from FCI stocks for ethanol distilleries for the Ethanol Supply Year 2026-27 (November 2026–October 2027), up from 52 lakh tonne in the current supply year. An additional 55 lakh tonne of 100 per cent broken rice will be sold via open market e-auction, which industry sources say could also flow into biofuel production at a more favourable procurement price of ₹64 per litre. The move is designed to shore up ethanol feedstock availability and support the government's push to sustain — and potentially raise — the 20 per cent petrol-blending target.
Biofuel push
Allocation Jumps as Government Doubles Down on Grain Ethanol
The Ministry of Food has directed the Food Corporation of India (FCI) to set aside 72 lakh tonne of rice for sale to ethanol distilleries during Ethanol Supply Year (ESY) 2026-27 — covering November 2026 through October 2027. The directive, communicated to FCI on July 16, marks a significant step up from the 52 lakh tonne earmarked in the 2025-26 supply year.
The rice will be sold at a fixed price of ₹2,390 per quintal. The move is part of a broader strategy to scale grain-based ethanol output, reduce fossil fuel import dependence, and provide distilleries with a reliable feedstock buffer against weather-driven disruptions in sugarcane and maize supply. Testing and trials for blending above the current 20 per cent threshold are already underway, according to the source report.
Cost advantage
Broken Rice E-Auction Opens a Higher-Margin Ethanol Route
Alongside the direct distillery allocation, the ministry has earmarked 55 lakh tonne of 100 per cent broken rice — produced under the Rice Milling Transformation (RMT) scheme — for sale through open market e-auctions, with a base reserve price of ₹2,000 per quintal fixed on July 2.
The commercial logic is compelling: oil marketing companies (OMCs) are mandated to procure ethanol made from FCI rice at ₹58.5 per litre, but the procurement price rises to ₹64 per litre for ethanol produced from broken rice. Since no formal restriction governs how e-auction broken rice is end-used, industry sources told the publication that distilleries could procure this material and route it into biofuel production — improving unit economics meaningfully. A committee will determine the Dynamic Reserve Price (DRP) every quarter, adding a layer of price flexibility.
Supply picture
Wider Allocation Covers State Agencies, Private Trade, and Open Market
The ministry's allocation framework extends well beyond ethanol:
- State governments and community kitchens (without e-auction): 16 lakh tonne at ₹2,320/quintal for July–October, and 32 lakh tonne at ₹2,390/quintal for November 2026–June 2027.
- Private parties and co-operatives (via e-auction): 25 lakh tonne at reserve prices of ₹2,660–2,890/quintal (July–October) and ₹2,740–2,970/quintal (November 2026–June 2027). Small private traders and individuals fall at the higher end of this band.
- 10% broken rice (open market e-auction): 20 lakh tonne at ₹3,090/quintal for July–October and ₹3,180/quintal for November 2026–June 2027.
Notably, allocations for national co-operatives — Nafed, NCCF, and Kendriya Bhandar — for retail sale under the 'Bharat' brand have been deferred, with the government stating the quantity will be communicated later.
The bigger picture
Feedstock Security as Blending Targets Eye a New Ceiling
India's annual ethanol production stands at nearly 2,000 crore litres, but OMCs require 1,050–1,100 crore litres per year to sustain the existing 20 per cent blending mandate. The headroom between production capacity and blending need is not vast, and any shortfall in sugarcane or maize output — a real risk in a deficient monsoon year — could squeeze supply.
Government rice stocks act as a strategic feedstock reserve in this scenario, offering distilleries volume certainty that weather-sensitive crops cannot. With trials for blending beyond 20 per cent already in progress, the expanded FCI rice allocation appears calibrated not just for today's target but for a higher blending ceiling that could be notified in the near term.
Why it matters
With annual ethanol production running at nearly 2,000 crore litres and oil marketing companies requiring 1,050–1,100 crore litres to meet the 20 per cent blending mandate, securing a reliable grain-based feedstock pipeline is critical — particularly given monsoon risks to sugarcane and maize. The pricing differential between FCI rice (₹58.5/litre) and broken rice (₹64/litre) ethanol creates a meaningful margin incentive for distilleries to chase the e-auction route. Policymakers and traders should watch quarterly Dynamic Reserve Price decisions and the government's pending move on blending targets above 20 per cent, both of which will shape distillery economics through 2027.
Frequently asked
- How much FCI rice has been allocated for ethanol production in ESY 2026-27?
- The food ministry has reserved 72 lakh tonne of FCI rice for sale to ethanol distilleries at ₹2,390 per quintal for the Ethanol Supply Year 2026-27, covering November 2026 to October 2027. This is up from 52 lakh tonne allocated in the 2025-26 supply year.
- What is the procurement price for ethanol made from FCI rice versus broken rice?
- Oil marketing companies are mandated to procure ethanol produced from FCI rice at ₹58.5 per litre. The price rises to ₹64 per litre for ethanol made from broken rice, giving distilleries a financial incentive to use broken rice as feedstock.
- What is the significance of the 55 lakh tonne broken rice e-auction allocation?
- The 55 lakh tonne of 100 per cent broken rice produced under the Rice Milling Transformation scheme will be sold through open market e-auctions at a base reserve price of ₹2,000 per quintal. Since there is no restriction on end-use, industry sources say distilleries could procure this rice for ethanol production, improving their margins given the higher ₹64 per litre procurement price for broken rice ethanol.
- How much ethanol do oil marketing companies need annually to meet the 20 per cent blending target?
- OMCs require between 1,050 and 1,100 crore litres of ethanol per year to meet the 20 per cent blending target with petrol. India's annual ethanol production currently stands at nearly 2,000 crore litres in total.
Source
This report summarises and analyses coverage from The Hindu BusinessLine — Agri Business. The analysis and India context are IndianAgri's own.