India may continue rice subsidy for ethanol to reduce stock

*Provisional

Rice procurement and offtake (lakh tonnes)

^Including under PMGKAY; *Upto January 23; **Upto December 31 New Delhi, January 29

As the Centre has approved about 860 crore litres capacity of grain-based ethanol plants, taking the total capacity of grain-based units to about 1,100 crore litres by including the existing plants, as much as 22-23 mt of rice will be required if all these plants use rice as feedstock. However, as all these approved proposals may not materialise and some plants may use maize as feedstock, there may be about 10-11 mt of rice seen to be utilised by these plants, which is enough to produce 440-480 crore litres, a government official said.

Bulging stocks

In 2020-21, apart from 35.6 mt off take of rice under NFSA and other regular schemes, the government could reduce the stock by additional 19.6 mt through distribution under the Pradhan Mantri Garib Kalyan Anna Yojana. Still, FCI had close to 50 mt of rice (including unmilled paddy in terms of rice) stock as on April 1, 2021 (end of FY21), which was 368 per cent more than the prescribed buffer norm and strategic reserve of 13.58 mt. Incidentally, the procurement of rice increased to record 60.19 mt in 2020-21 (October-September), up by over 16 per cent from the previous year.

Rice stock with FCI was at 53.89 mt (including unmilled paddy in terms of rice) as on January 1, 2022, which was more than 7-times the stocking norm of 7.61 mt. Besides, the high stock of rice also after as much as 36 mt off take reported under all schemes during April-December 2021.

Cost of grains

“There is no problem of stock available with the government. Real challenge is subsidy as at the current (provisional for 2022-23) economic cost of ₹36.70/kg and offer price for ethanol plants at ₹20/kg, the government bears ₹16.70/kg in every kilogram of rice. It has to be seen with savings on crude import as well as contribution towards reduction in pollution,” the official said adding there could be this subsidised rice made available to the industry for next five years.

The economic costs of grains vary as per the Budgetary support made available to Food Corporation of India (FCI) and so also the subsidy, said a former executive director of FCI pointing to previous practice of getting part-funding from NSSF as loan and bearing the interest burden. The food subsidy amount can be brought down if some mechanism is found to allow direct procurement of paddy at minimum support price (MSP) by the ethanol plants, he said.

As the Centre cleared the past arrear of FCI in by provisioning ₹4,62,789 crore for 2020-21 against ₹2,16,833 crore actual subsidy for that year, the economic cost of rice, for instance, dropped from ₹39.39/kg in 2020-21 to ₹35.97/kg estimated for 2021-22. Due to rising level of procurement as well as increase in MSP every year, the food subsidy claims of FCI has gone up to ₹2,17,460 crore (for 2021-22) against ₹1,09,600 crore in 2016-17.