In a dramatic shift from export curbs to surplus management, India is diverting a record 5.2 million metric tons of rice—nearly 9 per cent of global trade volumes—to ethanol production, signaling a bold policy pivot to rein in ballooning stockpiles while staying on track with its biofuel ambitions.

The move comes as the Food Corporation of India (FCI) wrestles with unprecedented inventories that soared to 59.5 million tons as of June 1—more than four times the mandated buffer stock. With another bumper crop expected from October and limited headroom for expanded exports, the government has turned to the ethanol sector as a strategic release valve.

India’s grain-based distilleries, which traditionally switch between corn, rice, and damaged food grains, have seen rice emerge as a dominant feedstock amid tighter corn supplies and high prices. This shift has inadvertently eased pressure on corn imports and stabilized domestic markets, delivering a ripple benefit across the agri-energy landscape.

The surge in rice-based ethanol production has helped India nearly achieve its ambitious target of 20 per cent ethanol blending in gasoline. The country hit 19.8 per cent blending last month—up from just 14.6 per cent a year ago—despite severe constraints on sugarcane availability due to last year’s drought. Until recently, sugarcane-based feedstock accounted for the majority of India’s ethanol output.

The structural change signals a broader recalibration of India’s biofuel strategy. With rice production at 146.1 million tons this year against domestic demand of 120.7 million tons, the government faces mounting pressure to optimize surplus management without distorting global markets—especially as India already accounts for over 40 per cent of global rice exports.

Grain ethanol manufacturers, however, say the economics are still tight. FCI is selling rice at Rs 22,500 per ton, while oil marketing companies are procuring ethanol at Rs 58.5 per litre—a narrow margin that may require pricing adjustments or policy incentives to scale further.

Meanwhile, exporters warn that relying solely on global markets is not a viable escape hatch. Rival exporters like Thailand and Vietnam are already feeling the heat, as India’s 2025 shipments are expected to hit a record 22.5 million tons, up nearly 25 per cent.

For now, ethanol appears to be the most pragmatic balancing act between farm procurement, clean energy targets, and food stock management. But with another surplus season looming, the policy challenge is far from over.