India is grappling with excessive rice stocks these days and keeping this in mind, it has allocated a record amount of rice for ethanol production. This stock is likely to increase further with the arrival of the new crop. This situation is in stark contrast to the previous shortage, which forced India to ban rice exports. Now converting rice into ethanol is helping the country get rid of excess stocks and is proving to be helpful in meeting the target of ethanol blending despite the shortage of traditional sources like sugarcane.
In March, India lifted the rice export ban imposed for two years, which was imposed due to drought. A good crop is expected this year due to adequate rains.
A government official said that the priority is food security, but when rice became much more than required, it was decided to use some of it in ethanol production.
The Food Corporation of India (FCI) has allocated the largest quantity ever — 52 lakh metric tonnes of rice — for ethanol, which is about 9% of the global rice trade. Last year, the figure was less than 3,000 tonnes. As of June 1, FCI had a total stock of 59.5 million tonnes, while the target for July was only 13.5 million tonnes.
The availability of rice has kept maize prices in check, which were previously at record highs and forced India to import large quantities of maize. Grain-based distilleries switch raw materials between maize, rice and other perishable grains depending on the price.
India, the third-largest importer of oil, aims to blend 20% ethanol in petrol by 2025/26. It almost met this in May when the blend reached 19.8% — thanks to the availability of rice. The target looked difficult when drought in 2023 reduced supplies of sugarcane, previously the main source of ethanol.
Stock Piling Up
According to Arushi Jain of the Grain Ethanol Manufacturers Association, if the government reduces the price of rice or increases the purchase price of ethanol, it is possible to use more rice for ethanol. Currently, FCI is selling rice at ₹22,500 per tonne, while oil companies are buying ethanol at ₹58.5 per litre, which does not give much profit.
B.V. Krishna Rao, president of the Rice Exporters Association, said that more rice is expected to be produced in the coming months, which will increase the stock further. However, India already has a share of more than 40% in global exports, so the scope for exports is limited.
After the ban on exports was lifted, India has started aggressive exports and its rice exports could grow by 25% to 22.5 million tonnes in 2025, which could shock competitors like Thailand and Vietnam.
This year, India has produced a record 146.1 million tonnes of rice, while domestic consumption is only 120.7 million tonnes, according to FAO.
Due to rising stocks, India may have to allocate a larger share of rice for ethanol production in the next marketing period as well. According to Himanshu Agarwal of Satyam Balaji, a rice exporter, it will not be easy for the government to dispose of this huge stock purchased from farmers.
