India's Ethanol Strategy: Balancing Fuel Production with Food Security

In a significant policy shift, the Indian government has approved the diversion of an additional 2.8 million tonnes of rice from the Food Corporation of India (FCI) stocks for ethanol production in the 2024-25 ethanol supply year (ESY), raising the total allocation to 5.2 million tonnes. This move aligns with India's ambitious Ethanol Blended Petrol (EBP) program, aiming for a 20% ethanol blend in petrol by 2025. However, the decision has sparked concerns regarding its implications for food security and resource management.

The government's decision to allocate surplus FCI rice for ethanol production is part of a broader strategy to manage excess grain stocks and promote renewable energy sources. With FCI holding over 540 lakh tonnes of rice—more than three times the required buffer stock—the move aims to alleviate storage challenges and support the ethanol industry's growth. Ethanol producers can participate in e-auctions to purchase rice between August and October 2024 under the Open Market Sale Scheme (OMSS), with a revised reserve price of ₹2,250 per quintal, down from ₹2,800. 

The policy also permits sugar mills to produce ethanol from sugarcane juice, syrup, and B-heavy molasses, reversing previous restrictions imposed due to poor monsoon seasons affecting cane crops. These measures are intended to boost ethanol production, ensure timely payments to farmers, and reduce India's dependence on fossil fuels.

Despite the potential benefits, the diversion of food grains for fuel has raised concerns about food security. Critics argue that using rice—a staple food—for ethanol production could impact the availability and affordability of food, especially for vulnerable populations. Additionally, the environmental implications of promoting water-intensive crops like rice and sugarcane for biofuel production are under scrutiny, given India's depleting groundwater resources and erratic monsoon patterns. 

The Grain Ethanol Manufacturers Association (GEMA) has requested the government to issue surplus FCI rice to the grain ethanol industry and ensure price equalization for grain-based ethanol. They highlight the challenges faced by the sector due to rising feedstock costs, which threaten the viability of ethanol production. 

Financially, the FCI has sold 13.05 lakh tonnes of rice for ethanol production till July 10 in the 2022-23 marketing year, earning revenue of ₹2,610 crore. However, the economic cost per quintal of rice is estimated at ₹4,294, indicating a significant subsidy when sold at the revised reserve price. 

Conclusion

India's initiative to utilize surplus FCI rice for ethanol production reflects a strategic effort to balance energy needs with agricultural resource management. While the policy supports the EBP program and addresses grain storage issues, it necessitates careful consideration of food security and environmental sustainability. Ongoing assessments and stakeholder consultations will be crucial to ensure that the pursuit of renewable energy does not compromise the nation's food supply and ecological balance.