Ethanol Production Hit as FCI Stops Rice Supply
About 100 odd distilleries in Uttar Pradesh, Maharashtra and other States producing ethanol have shut operations or are in the process since the supply of subsidised rice from the Food Corporation of India (FCI) has stopped since July 1, 2023. Distillers and associations such as the All India Distillers Association (AIDA) have approached the government to resolve the crisis immediately since it is resulting in distilleries sitting idle on their capacities.
On July 20th, the Government of India further amended the export policy, prohibiting with immediate effect the export of non-basmati white rice. This step was taken in order to ensure adequate availability of non-basmati White Rice for the Indian market and to allay the rise in prices in the domestic market. While this will help stabilise the price of the rixe in the local markets, this decisions have created somewhat of a crisis in the ethanol production and the set targets by the government are not going to be achievable.
The President of AIDA, V.N.Raina told Ambrosia that the Association had approached the Ministry of Consumer Affairs, Food and Public Distribution and also the Ministry of Petroleum, to avert further damage to the industry, by resuming supply of subsidized rice from FCI. The decision of the government he said had resulted in “stopping of grain ethanol industry and no production of ethanol is being carried out. We have apprised them of this issue as availability of damaged grains is almost minimum in the market, the FCI surplus rice must therefore be issued according to the allotments to distilleries immediately to enable the industry meet the goal of reaching 12% ethanol blending by the end of Oct-2023.”
Disrupts entire ethanol programme
Mr. Raina added that the distillery industry has been left without any FCI rice which is the sole feedstock available to the grain-based distilleries. “The stoppage has completely disrupted the entire ethanol programme and distilleries are left with no alternative but to stop production. This is very serious stoppage which must be rectified immediately,” he added.
Asked whether these distilleries could manage with supply of other grains, Mr. Raina said “Although the industry has choice of other grains like damaged rice and maize, but these are not available in sufficient quantity in the market and also the price of ethanol fixed by the govt. against supplies of these grains are unviable for the industry. We have been requesting the govt. to revise the prices to enable distilleries use this alternative also, although the available quantity will not be sufficient to meet the entire requirement for blending target without surplus rice from FCI. As far as sugarcane is concerned, there is nothing against supplies of sugar and sugarcane although this is the off -season period the total entire goal of blending cannot be fulfilled by sugar industry ethanol from grains is vital to fulfill nearly 50% of the total requirement of ethanol for achieving 20% blending by the year 2025-2026.”
As per data made available by FCI, in June 2,77,419.98 metric tonnes of subsidized rice was supplied to distilleries for ethanol production, a 216 per cent increase from 2022 June. In May it was 2.95 lakh metric tonnes.
Government admits shortfall in foodgrains productionThe Minister of State for Consumer Affairs, Food and Public Distribution, Sadhvi Niranjan Jyoti recently informed Lok Sabha that “Considering expected deficiency in rainfall caused by El Nino as speculated by the India Meteorological Department due to which Kharif crop production in the country may be affected…. In order to control inflationary trends and to maintain adequate stock levels under central pool for distribution under National Food Security Act and other welfare schemes for the benefit [of people], sale of wheat and rice under Open Market Sale Scheme (Domestic) for state governments, including Tamil Nadu, has been discontinued with effect from 13.06.2023.”
She further said that “State governments of Karnataka, West Bengal and Tamil Nadu have requested for wheat and rice under OMSS(D) Policy which was not acceded to due to discontinuation of sale of wheat and rice to states under OMSS(D) 2023.”Due to this the supply to distilleries has got affected. However, she mentioned that in 2022-21, subsidized rice supplied for ethanol was 49,000 MT, which increased to 10.68 lakh MT in 2021-22 and 13.05 lakh MT in 2022-23, up to July 10. Of 24 lakh MT supplied to distilleries for making ethanol so far, the maximum — 1.67 lakh MT — has been bought by Chandigarh Distillers & Bottlers Ltd, is followed by Bihar Distilleries and Bottlers Pvt Ltd (1.57 lakh MT), and BCL Industries Ltd (0.13 lakh MT). The government is expected to provide 32 lakh MT rice for ethanol during 2022-23 and with this disruption, it remains to be seen how the government will fulfil that obligation.
The price of rice supplied for ethanol is much lower compared to the economic cost incurred by FCI on procurement and storage operations: these were Rs 3,939.26 per quintal in 2020-21; Rs 3,562.49 in 2021-22; Rs 3,858.19 in 2022-23 (revised estimates); and Rs 3,918.05 per quintal in 2023-24 (BE).
Retail prices going up
The Government, in a statement, has admitted that domestic prices of rice are increasing and that retail prices have increased by 11.5% over a year and 3% over the past month. Export duty of 20% on non-basmati white rice was imposed on 08.09.2022 to lower the price as well ensure availability in the domestic market. However, the export of this variety increased from 33.66 LMT (Sept-March 2021-22) to 42.12 LMT (Sept-March 2022-23) even after imposition of 20% export duty. In the current FY 2023-24 (April-June), about 15.54 LMT of this variety of rice was exported against only 11.55 LMT during FY 2022-23 (April-June), i.e. an increase by 35%. This sharp increase in exports can be ascribed to high international prices due to geo-political scenario, El Nino sentiments and extreme climatic conditions in other rice producing countries, etc.
Non-Basmati White Rice constitutes about 25% of total rice exported from the country. The prohibition on export of Non-Basmati White Rice will lead to lowering of prices for the consumers in the country, the government has stated.