OMCs to Float Tender for Supply of 110 Crore Litres of Ethanol Exclusively for FCI Rice

by Prabhudatta Mishra (The Hindu Business Line) Last week, the government lowered the issue price of rice to be sold to distilleries for making ethanol to ₹22.50/kg, as against the economic cost of ₹39.75/kg, effectively subsidising ₹17.25/kg from public exchequer -- Oil marketing companies this week are expected to float tender under Cycle 3 (C3) for the supply of about 110 crore litres of ethanol during ESY2024-25 (November-October) which has been restricted only to ethanol to be produced from the subsidised rice of the Food Corporation of India (FCI) to be sold at ₹22.50/kg. The government has also fixed maximum quota of 24 lakh tonnes (lt) for FCI to sell to ethanol distilleries. READ MORE

Excerpt from Commodity Information News: This week, oil marketing companies are preparing to issue a tender for 110 million litres of ethanol for the upcoming supply year 2024–25. They will source this ethanol from rice purchased at the reduced price of USD 0,27 per kg from the Food Corporation of India, marking a decrease from the previous rate of USD 0,336 per kg.

To manage costs and ensure efficient use, the government has limited the rice supply for ethanol production to 24 million tonnes. This strategic decision aims to reduce the financial burden on the government, potentially saving about USD 468 million against the usual economic cost of rice, which is USD 0,477 per kg.

Tailored Solutions for Distilleries

Distilleries are set to produce around 112 to 113 million litres of ethanol from this allocated rice. This flexibility is crucial for producers who struggle to source maize or broken rice from the market. They can now use rice from the Food Corporation as an alternative, following specific procurement conditions.

Stringent Procurement Guidelines

Ethanol distilleries must register with oil marketing companies to qualify for the purchase of this rice at a special price. They need to show their contracts with these companies and will receive rice based on the ethanol quantities outlined in their agreements. Moreover, they must report the volume of ethanol produced from this rice to the food ministry every month.

Adjustments to Rice Pricing

Concurrently, the government has reduced the reserve price for rice under the Open Market Sale Scheme by USD 2,70 per quintal to USD 27,00, effective until June 30, 2025. While state governments benefit from this reduced rate, private traders and central cooperatives like Nafed and NCCF will pay slightly different rates.

Conclusion: A Strategic Move Toward Sustainability

With the current Central Pool rice stocks at a robust 610 million tonnes, up 18% from last year, these initiatives are about more than just increasing biofuel production; they also aim to manage excess rice stocks effectively. By reducing reserve prices under the Open Market Sale Scheme, the government is supporting state food security initiatives. The carefully crafted eligibility and reporting rules ensure that benefits are precisely targeted and efficiently administered. READ MORE