Govt may ask FCI to sell 1.5 MT broken rice for grain-based biodiesel units

Move to dispose of 1.5 mt of broken rice will partly address concern of grain-based distillery capacities remaining idle

The government may direct Food Corporation of India (FCI) to dispose of around 1.5 million tonnes (mt) of broken rice as feedstock for grain-based biofuel units. The measure will compensate for the projected drop in sugarcane production due to drought and excessive rainfall and will prove to be a milestone in the country’s food-for-fuel policy. 

Sources said the step would have twofold impact. First, it will address the concern of approximately 750 million litres of grain-based distillery capacities lying idle due to lack of feedstock, to some extent. Secondly, this will absorb some of the surplus rice lying with FCI, which is estimated to be three times the required quantity of 21.27 mt as of December 2019. 

The total capacity of grain-based distilleries in the country is around 2 billion litres, of which around 38 per cent (750 million litres) is lying unused due to lack of feedstock availability. 

Officials said the disposal would be strictly monitored to allay any misconception that food stock is wasted for fuel when millions of children in the country remain malnourished. 

Officials said a formal tender and a policy announcement in this regard were expected very soon. For this, the Union Cabinet could also be approached if needed. To ensure that the grain-based biodiesel units get the broken rice at an appropriate rate, officials said a consensus seems to building on selling the same at Rs 22-23 a kilogram.

This is lower than the current estimated economy cost of such old unused rice stocks estimated at around Rs 27 a kg. Oil Marketing Companies (OMCs) are being convinced to purchase this ethanol produced from broken rice at Rs 59.48 per litre.

This is higher than the current rate fixed for ethanol produced from damaged grain unfit for human consumption so that grain-based distillery units get some return on investment.

The present rate for ethanol derived from damaged foodgrains unfit for human consumption (supply year December 1, 2019 to November 30, 2020) is Rs 47.63 per litre. These prices are being talked about because grain-based distillery units say that the price of Rs 47.63 per litre was good when rice prices were low. 

But, now when rice prices in the open market and also that being sold by FCI through its open tenders have gone up due to persistent increase in the minimum support price (MSP), the rate of Rs 47.63 per litre is not remunerative enough. 

This is one of the reasons why 750 million litres of grain-based distillery capacity is lying unused. 

The distillers want the price of broken rice supplied to them from FCI godowns should be around Rs 22-23 per kg, while at the same time OMCs purchase the ethanol produced from this grain at a rate higher than the current price. The government, officials said, is seriously considering both the suggestions as it wants to kick start the 10 per cent ethanol blending programme in the right earnest, which, as the current year has shown, can’t rely just on sugarcane. This year, as against the requirement of 5.11 billion litres of ethanol, sugar mills and grain-based distilleries together submitted bids for just 1.63 billion litres of ethanol in 2019-20 (December-November).

This has put a question mark on the government’s ambitious plans for 10 per cent blending by 2020.  Officials said another problem before the programme is to map the warehouses where FCI has surplus grain and where the surplus grain-based distillery capacities are located so that transportation costs are less.

For that, the Centre has started working with states to search for areas where rice production is in surplus after providing for PDS operations and link it with the distilleries nearby. 

Chhattisgarh has already started working on the proposal. The Bhupesh Baghel government floated a tender in October which estimated that Chhattisgarh has around 3.8 mt of surplus rice in 2018-19 after meeting the state’s PDS requirement.

The surplus rice can be used for grain-based ethanol production. The tender is for setting up of new bio-refineries in the state. Baghel in November had asked Petroleum Minister Dharmendra Pradhan to allow those states that have extra rice crops to make biofuel. 

Allaying fears of any future shortfall in feedstock for grain-based ethanol plants, officials said according to their estimates, around 14 per cent of the cereals (rice+wheat) or around 50 million metric tonne produced in the country is left surplus every year. 

Meanwhile, the petroleum ministry has asked Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation to speed up its plans to come up with 12 second-generation ethanol manufacturing units, based on non-sugarcane sources. 

“By December 2020, five of these plants at Dahej, Bargar, Panipat, Bathinda, and Bina will be commissioned,” an official said. 

Alternatively, existing sugarcane-based ethanol manufacturing units are being encouraged to convert their distilleries into multi-modal plants. These plants can make ethanol both from grains and sugarcane. However, officials said such sugar plants need to invest Rs 15-20 crore more to convert their existing sugarcane-based ethanol-making units into the ones that can use grains also as feedstock.