# Bioethanol and Rice In India, rice from the government's surplus stocks has become a major ethanol feedstock, sold to distilleries at a fixed price. Its use rises and falls with official judgements about food stocks, so the link is a policy valve rather than a market price relationship. Source page: https://www.materialinsights.org/links/bioethanol-and-rice/ [Bioethanol](https://www.materialinsights.org/energy/bioethanol/) (chemical) and [Rice](https://www.materialinsights.org/commodities/rice/) (commodity): 3 relationships. ## How they are linked ### 1. Feedstock: surplus rice *Physical flow · Strong · Rice to bioethanol* Rice is mostly starch, so grain distilleries can ferment it like maize, and India holds large public rice stocks above its buffer needs. - **22.25%** FCI rice share of the first ESY 2025-26 ethanol allocation - **about 470 L** ethanol per tonne of FCI rice The allocation for FCI rice, about 233 crore litres, sits behind only maize. Damaged food grains, which can include rice, add a further 4.54%. In India much of the rice used for ethanol comes from public stocks rather than the open market. Sources: [ChiniMandi](https://www.chinimandi.com/?p=348019); [Down To Earth](https://www.downtoearth.org.in/amp/story/agriculture/centre-approves-additional-28-million-tonnes-of-fci-rice-for-ethanol-production) ### 2. FCI rice sales to distilleries *Policy · High in India · Food stock policy sets the volume* The Food Corporation of India decides how much rice it can release after assessing buffer stocks, and the food ministry sets the issue price, so supply to distilleries is an administrative decision. - **5.2 Mt** FCI rice approved for ethanol in 2024-25 - **Rs 22.50 per kg** issue price of FCI rice for distilleries, 2025 The government capped FCI rice for ethanol when rice prices rose, then allowed distilleries to buy up to 2.3 Mt by e-auction from August to October 2024, and in 2025 raised the 2024-25 allocation by 2.8 Mt to 5.2 Mt. The change of course within about two years shows how quickly the valve can close if harvests disappoint. Each extension has renewed concerns about diverting a staple grain to fuel. Sources: [Down To Earth](https://www.downtoearth.org.in/amp/story/agriculture/centre-approves-additional-28-million-tonnes-of-fci-rice-for-ethanol-production); [Down To Earth](https://www.downtoearth.org.in/amp/story/food/india-relaxed-cap-on-production-of-ethanol-from-sugarcane-and-paddy-after-8-months) ### 3. Price link: grain feedstock *Cost and price · Weak · Both ways* Indian rice released for ethanol is sold at an administered price and world rice prices are shaped by export rules, so neither tracks the US ethanol index used here. - **-0.03** monthly change correlation - **0.02** 12-month change correlation - **0.26** fitted elasticity The absence of a price link is the finding: rice-based ethanol in India depends on stock levels and the fixed issue price, not on fuel prices. A change in the issue price, or a halt in sales, moves distillery economics far more than any market price. Sources: [Material Insights (World Bank, FRED, IMF data)](https://www.materialinsights.org/energy/bioethanol/correlation/) ## For investors ### Key learnings 1. Grain distilleries in India that rely on FCI rice face regulatory supply risk, since the volume and price are set by the food ministry each season. 2. Distilleries able to switch between rice and maize are better placed, because they can move to whichever feedstock policy and prices favour. 3. Rice for ethanol has no meaningful market price link, so feedstock cost forecasts should start from the FCI issue price and allocation notices. ### What to track - **FCI rice allocation and issue price for ethanol**: Higher allocations or a lower price improve grain distillery margins (As notified · Ministry of Consumer Affairs, Food and Public Distribution) - **FCI central pool rice stocks against buffer norms**: Large surpluses make further releases likely (Monthly · Food Corporation of India) ## For policymakers ### Key learnings 1. Using surplus rice for ethanol turns costly excess stocks into fuel, but the policy must stay reversible when harvests fall short. 2. The issue price, set by the government rather than a market, decides how attractive rice is to distilleries and how much is drawn away from other uses such as open market sales and welfare schemes. 3. Building rice into the E20 programme ties fuel security to monsoon outcomes, which argues for keeping maize, cane and waste routes in the mix. ### What to track - **Rice procurement and offtake under food schemes**: Lower procurement or higher offtake narrows the surplus available to distilleries (Monthly · Department of Food and Public Distribution) - **Domestic rice retail prices**: Rising prices raise the pressure to halt sales to distilleries (Daily · Department of Consumer Affairs price monitoring) ## India India stands out in using rice from public stocks for fuel ethanol: 5.2 Mt of FCI rice was approved for 2024-25, and FCI rice made up 22.25% of the first ESY 2025-26 allocation. ## Sources 1. [Price correlation, Material Insights](https://www.materialinsights.org/energy/bioethanol/correlation/), Material Insights (World Bank, FRED, IMF data) 2. [ESY 2025-26: OMCs allocate around 1048 crore litres for ethanol supply; maize holds share of around 45 per cent](https://www.chinimandi.com/?p=348019), ChiniMandi (2025) 3. [Centre approves additional 2.8 million tonnes of FCI rice for ethanol production](https://www.downtoearth.org.in/amp/story/agriculture/centre-approves-additional-28-million-tonnes-of-fci-rice-for-ethanol-production), Down To Earth (2025) 4. [India relaxed cap on production of ethanol from sugarcane and paddy after 8 months](https://www.downtoearth.org.in/amp/story/food/india-relaxed-cap-on-production-of-ethanol-from-sugarcane-and-paddy-after-8-months), Down To Earth (2024)