No takers for FCI stocks among grain based distilleries.

Written by Sandip Das.

Given the high rice stocks, the government is discussing a reduction in the reserve sale prices of broken rice offered to grain-based distilleries for ethanol manufacturing from the central pool held by the Food Corporation of India (FCI).

Sources told FE that discussions are on to get more clarity on the availability of feed stock – maize and rice for manufacturing bio-fuels.  Officials acknowledge that there has been no takers for broken rice allocated for ethanol manufacturers because of higher prices fixed by the government.

“We are discussing the issue with all the stakeholders,” sources said, adding that reduction of prices is under consideration.

In August, the government lifted a 13 months ban on rice sales to ethanol distilleries by sanctioning purchase of 2.3 million tonne (MT) from the central pool grain stocks for distilleries at Rs 28/kg excluding transportation cost. The rice was to be sold through e-auction under the open market sale scheme (OMSS) of the FCI.

However, there were no takers of broken rice under OMSS for ethanol manufacturers citing lack of financial viability.

At present, FCI and agencies hold 28 MT of rice stocks, excluding 28.5 MT receivable from millers. The rice stock is against the buffer of 7.61 MT for January 1.

“To reduce the demand pressure on only grain available – maize, the government should release rice unfit for human consumption to the ethanol industry at a price of Rs 20 to 21, which would help sustain the industry’s viability,” Abhinav Singal, committee head and treasurer, Grain Ethanol Manufacturers Association (GEMA), told FE.

Singhal said that maize prices have risen sharply because of demand from the poultry and livestock feed industry.

Currently the oil marketing companies pay Rs 64/litre for ethanol produced from the rice. There are around 110 grain-based ethanol manufacturers across Punjab, Haryana, Uttar Pradesh, Maharashtra, Madhya Pradesh, Bihar, West Bengal and Tamil Nadu currently using maize as main feed stock.

While maize has been recommended by the government as the primary feedstock for the grain-based ethanol industry, as a temporary measure, damaged grains from the FCI stocks were allocated to industry till maize availability in the country increases.

Officials said there has been a lukewarm response to open market sale of rice for bulk buyers from FCI stocks this fiscal. In FY25, only 0.7 MTof rice was sold by FCI at Rs 28/kg so far.

To achieve the 20% ethanol blending target for ethanol supply year (November-October) in 2025-26, the country needs to produce more than 1000 crore litres of ethanol from 545 crore litres in 2023-24. With sugar-based ethanol production having been capped, ethanol production from grain becomes imperative, according to a GEMA note.

During ESY in 2023-24, 14.6% blending with petrol has been achieved, according to an official note.

It stated that the capacity of molasses-based distilleries and grain-based distilleries are 941 crore litres and 744 crore litres respectively.

Published Date: December 23, 2024