India has record rice reserves, will increase ethanol processing

India has accumulated record rice stockpiles, and the excess is being processed into ethanol. The state food corporation FCI has allocated 5.2 million tonnes for this purpose. This volume corresponds to about 9% of global supplies in the 2024-2025 marketing year, which ends in June. Last year, less than 3,000 tonnes were allocated for processing into ethanol, Reuters reports.

The situation with rice has changed dramatically compared to the shortages of previous years, when the authorities were forced to introduce export restrictions. The latter were lifted in March.

FCI is buying up almost half of the country’s rice harvest: as of June 1, the state corporation has record stocks, including paddy, of 59.5 million tonnes, which is significantly higher than the government’s target of 13.5 million tonnes by July 1.

Processing plants use corn, rice and substandard food grains as raw materials, switching between them depending on the price.

India, the world’s third-largest importer and consumer of petroleum products, plans to increase the share of ethanol in its auto fuel to 20% by 2025-26. Last month, the country nearly reached the target share, taking it to 19.8%, thanks to ample rice supplies.

The 20% target seemed out of reach when sugarcane supplies, which accounted for 80% of ethanol feedstock three years ago, fell sharply due to drought in 2023, forcing the world’s largest sugar consumer to sharply curtail cane processing into ethanol.

Last year, India’s ethanol share in gasoline was 14.6%.

Forecasts

Rice distillation volumes will grow faster if the government either lowers rice prices or raises the ethanol purchase price, said Arushi Jain, deputy secretary of the Grain Ethanol Producers Association.

FCI is selling rice at INR 22,500 ($262.19) per tonne while oil companies are buying rice ethanol at INR 58.50 per litre, which does not provide enough margin to further increase production of the distillate, warns Akshay Modi, managing director of ethanol producer Modi Naturals Ltd.

FCI’s stockpiles could rise further as India is likely to reap record volumes during the harvest, which starts in October, according to B.V. Krishna Rao, president of the Rice Exporters Association.

India can only increase exports to a point, Rao said, as it already accounts for more than 40% of the world’s rice supply.

India has been actively exporting rice after the lockdown is lifted. Exports are expected to rise by almost 25% to reach a record 22.5 million tonnes in calendar year 2025. This will hurt rivals Thailand and Vietnam, Reuters writes.

In the current crop year, which ends in June, India has harvested a record 146.1 million tonnes of rice. The volume is significantly higher than domestic demand of 120.7 million tonnes, according to the UN Food and Agriculture Organization (FAO).

The increase in stockpiles will force the country’s authorities to allocate even more rice for ethanol production in the next marketing year, suggests Himanshu Agarwal, chief executive of Satyam Balajee, which exports the crop.

Tags: rice, India, ethanol