NEW DELHI – India is considering a proposal to expand the sale of broken rice from state stockpiles into the open market, according to sources, a move that may boost supplies of the grain for exports and ethanol production.

The world’s top exporter launched a pilot programme earlier in 2025 to cut the proportion of broken grains in rice distributed through its food programme to 10 per cent from 25 per cent, diverting the remainder for industrial use.

The plan is expected to help state-run Food Corporation of India (FCI) trim its bulging reserves and free up some space for the upcoming harvest, as well as improve supplies of the raw material for ethanol makers, said the sources, who asked not to be named as the information is not public.

Under the current system, the food agency purchases unmilled rice from farmers at guaranteed prices and gives it to private millers for processing. The rice it receives in return often contains up to a quarter of broken grains.

A Food Ministry spokesperson did not immediately respond to a request for comment.   

The initiative will help Indian households receive better-quality rice under the free food programme, while the FCI can reduce its storage costs.

At the same time, the ethanol sector stands to gain from cheaper raw material as extra supplies of broken rice flow into the market. 

The move could also ease the pressure on sugar mills to ramp up production of the green fuel from cane juice. That, in turn, may boost sugar output and prompt the government to consider allowing more exports of the sweetener.

India’s rice stockpiles have surged to their highest for this time of year in at least two decades, raising concerns about storage shortages as another record harvest approaches.

The overflowing reserves – now equal to more than a tenth of annual global production – are proving a challenge for the world’s second-largest producer, with the authorities scrambling to create more storage space. 

Forecasts of above-average monsoon rains have further fuelled expectations of yet another bumper crop, intensifying worries that excess grain could rot in open storage yards.

The government’s rice inventories totalled almost 38 million tonnes in June, according to the FCI.

It also held more than 32 million tonnes of the unprocessed grain, equivalent to about 22 million tonnes of rice, data showed.

The country maintains wheat and rice reserves for various welfare programmes, including 5kg of free grains per person every month to about 800 million people.

India has decided to increase the price of rice sold from state reserves to ethanol producers to 23,200 rupees (S$350) per tonne, according to a local media report.

That is still more than 30 per cent cheaper than similar varieties in the local market, as well as from Thailand, Vietnam and Pakistan.

Additional sales from state reserves could make Indian rice even more competitive abroad, intensifying pressure on rival exporters.

That would likely push global prices lower, benefiting poorer households in African nations such as Senegal and Ghana, as well as animal feed and ethanol producers in China – all major buyers of broken rice in the global market. Bloomberg

Published Date: July 12, 2025