Current FCI rice and maize price not viable for ethanol production, says Abinash Verma
By Prakash Jha
Recently, the Central Government has allowed the Food Corporation of India (FCI) to sell rice to distilleries for the production of ethanol, capping the quantity limit at 23 lakh metric tonnes. This decision has been welcomed by biofuel producers; however, they also state that the current price is not viable.
Abinash Verma, an ethanol expert, ex-bureaucrat, former Director General of ISMA, and now a promoter of a grain-based ethanol plant, while speaking to ChiniMandi said, “We have been waiting for a long time for permission for FCI rice to be given to ethanol manufacturers. Recently, they granted permission, but procedurally it seems very difficult. The first challenge will be that we will have to participate in e-auctions, which will occur every week. If it is depot-wise, will there be availability in the e-auction held at the depot near me? Will there be enough quantity? That question arises first. Secondly, I noticed that on August 28, they conducted the e-auction, and the FCI rate for rice is around Rs.31.5 per kg. If I bring it from their godown to my factory, it costs almost Rs. 32. If I calculate based on Rs.32, it will be a non-starter unless the government and the Oil Marketing Companies (OMCs) decide to increase the ethanol price, which is currently Rs.58.50 per litre. A simple calculation shows that if I buy rice from FCI at Rs.32 and obtain 450 liters of ethanol per ton, the cost of rice per litre of ethanol comes out to nearly Rs.72, while the current price of Rs.58.50 is obviously unworkable.”
He believes that government might come with the following order. Verma stated, “I expect that there will be some additional order following this. FCI rice is sold to NAFED and NCCF as Bharat rice at Rs.24. If it is available at Rs.24 for ethanol plants, then it becomes workable. Expecting OMCs to buy ethanol from us at Rs.80 seems far-fetched. I believe that the price of FCI rice, currently seen by ethanol manufacturers at Rs.32, should be reduced by the government to around Rs.24. I expect this will happen.”
Regarding maize, he mentioned, “Last year, the Minimum Support Price (MSP) was around Rs.2,090 per quintal; for 2024-25, it has been increased to Rs.2,225 per quintal, which is about a 6% increase in the MSP. I have a plant in Purnia, in the northeastern part of Bihar, which is a maize belt and probably produces the best maize in the country. If I cannot viably purchase that maize to make ethanol, then I think no maize-based ethanol producer in India can be viable. Today’s maize prices, which were Rs.20.50 to Rs.21 per kg two months ago, are now at Rs.26 to Rs.27 per kg, which is much higher than the MSP set by the government. Therefore, the government needs to address this. What has happened is that all efforts were made to find out how to produce ethanol from maize, while the potential of using broken rice or FCI rice was ignored over the past year, putting all the pressure on maize. When the pressure increased on maize, the price inevitably rose, so we need additional feedstock to make it available.”
He explained, “Today, if I buy broken rice from the market, it is not available for less than Rs.28 per kg. If I purchase it, I receive only Rs.64 per liter for ethanol, compared to almost Rs.72 per litre from maize-based ethanol. There is a big price difference. The price that ethanol manufacturers receive from oil marketing companies should be same. There is a need to revise the prices for both FCI rice-based ethanol and damaged food grain-based ethanol. There is a huge gap between Rs.64, Rs.58.50, and Rs.72, and if we do not address this, all the pressure will fall on maize, making it increasingly unavoidable for us to use.”
According to reports, the Oil Marketing Companies may soon decide on the prices of ethanol.
As per an order from the Department of Food and Public Distribution, distilleries will be allowed to participate in an e-auction and purchase rice from August to October 2024, based on the final auction rates set weekly. The order emphasized that rice will be available for purchase only if the distilleries have received an ethanol allocation from OMCs, using FCI rice as a raw material.
Recently, during an event, Union Minister for Petroleum and Natural Gas Hardeep Puri assured the industry of stability in ethanol prices.
This article has been republished from Chinimandi