Why India's plan to sell rice for ethanol undermines food and water security

In a recent policy shift with regard to India’s Ethanol Blended Petrol Programme, excess rice stocks of the Food Corporation of India are being made available for ethanol production at a reduced reserve price. In this post, Akanksha Jain argues that while the move might resolve an immediate supply chain bottleneck, it risks distorting the long-term balance between food security, environmental sustainability, and bioenergy policy.

India’s ethanol blending policy has gained momentum over the last decade, backed by climate goals, energy security concerns, and an aspiration to reduce dependence on imports of fossil fuels. The policy mandates a gradual increase of ethanol content in petrol, with a target of 20% by 2025-26. This target demands over 1,000 crore litres of ethanol production annually, up from around 545 crore litres in 2023-24. With sugar-based ethanol already capped due to concerns over sugar availability and water use, the grain-based ethanol is expected to fill the gap. Currently, there are more than 110 grain-based ethanol manufacturers across India, most relying on maize. Maize has been recommended as the primary grain feedstock for ethanol production due to its lower water footprint in cultivation (Chauhan 2024). However, it is experiencing supply strain due to competing demand from the poultry and livestock industries.

In this context, the Food Corporation of India is positioning surplus rice as an alternative – with a cap of 24 lakh metric tonnes of rice for ethanol production – as evidenced by the recent reduction in the reserve price of rice from the central pool for ethanol production. This proposal comes after grain-based distilleries showed little interest in purchasing broken rice offered by the FCI at Rs. 28 per kilogram under the Open Market Sale Scheme (OMSS), as the price was commercially unviable. The Ministry of Consumer Affairs is reportedly considering reducing the price to Rs. 20-21 per kilogram to encourage uptake.

This post argues that this policy shift raises concerns about the long-term sustainability of the country’s biofuel trajectory. While this might resolve an immediate supply chain bottleneck, it risks distorting the long-term balance between food security, agricultural sustainability, and bioenergy policy.

Surplus food is for food security, not fuel generation

India’s grain surplus – particularly in wheat and rice – is a structural feature, rather than an anomaly, with FCI stocks consistently breaching buffer norms (Drèze and Oldiges 2024). The binary argument that diversion for ethanol is preferable to grain spoilage obscures systemic inefficiencies in procurement, storage, and redistribution logistics (Comptroller and Auditor General of India, Standing Committee Reports). Surplus food is a strategic asset, not biofuel feedstock. Instead of ethanol conversion, it can be used as a buffer against global supply chain shocks, targeted for repurposing through fortified grain initiatives, school meals, disaster relief, and urban nutrition schemes. Reforming warehousing and enabling interstate transfers via Integrated Management Public Distribution System (IMPDS), offers better returns than turning rice to ethanol.

Another important dimension is that the rice being diverted may not necessarily be unfit for human consumption. Often, "broken" or "lower grade" rice is consumed by economically vulnerable populations, used in processed foods, or redirected to livestock feed and even exported. In 2022-23, India exported over 4 million tonnes of broken rice, especially to Africa and Southeast Asia. Without a robust, transparent quality assessment mechanism, claims that such rice is inedible are contestable. Reallocating it to ethanol distilleries without transparency in quality classification and ensuring food supply sufficiency risks misusing public food stocks for energy.

If the reserve price of rice is dropped, ethanol manufacturers may benefit in the short term. But it risks normalising the idea that surplus food can be burned for fuel, even when millions remain food insecure. A robust ethanol policy must be rooted in sustainability science, not just supply chain management. Instead of creating a resilient feedstock strategy for ethanol production, the State is falling back on FCI’s foodgrain surplus – a measure meant for food security, not fuel generation.

Environmental costs of paddy cultivation

The use of rice for ethanol production is also deeply problematic from an environmental lens. Rice is one of the most water-intensive crops cultivated in India. Producing one kilogram of rice requires approximately 2,500-5,000 litres of water, and paddy farming is a major contributor to groundwater depletion in key states like Punjab and Haryana. To put this water usage in context, rice cultivation accounts for more than one-quarter of India's total freshwater use, which is a significant amount for a water-constrained country like ours (Saccoccia and Kuzma 2024). Additionally, flooded rice fields contribute to methane emissions, adding a potent greenhouse gas to India's emissions profile (Rajendran et al. 2024). By contrast, maize requires roughly 900-1,200 litres of water per kilogram, matures faster, and offers better heat tolerance (Dang et al. 2022). Replacing maize with rice as a feedstock for ethanol would exacerbate India’s existing groundwater stress and undermine commitments to climate mitigation.

India’s agro-ecological zoning and cropping pattern recommendations by the Indian Council of Agricultural Research (ICAR) and NITI Aayog have long advocated diversification away from rice in the Indo-Gangetic plain due to environmental degradation. Encouraging ethanol from rice contradicts these policy prescriptions aimed at sustainable crop diversification. Even without changes to minimum support prices (MSP), creating a secondary demand channel through ethanol distilleries sends price signals to farmers. In states with distortionary procurement regimes, this can incentivise continued or even increased production of high-input, low-efficiency crops like paddy.

From a long-term nationalistic perspective, valorising staple grains for fuel in a resource-constrained country risks intergenerational injustice. Groundwater, once depleted, takes centuries to recharge. Climate impacts from methane and inefficient land use are cumulative. In this context, protecting staple grain from fuel commodification is not just an environmental stance – it is a strategic act of national resource stewardship.

Maintaining the balance of the water-energy-food nexus

This policy pivot runs counter to the principles of the water-energy-food nexus – a concept widely recognised in sustainability science. When policies in one domain (for example, energy) compromise the sustainability of another (for example, food or water), they create systemic vulnerability. The absence of integrated planning across ministries such as agriculture, petroleum, food, and environment has led to a case of contradictory decisions: capping sugar for ethanol, on one hand, but pushing rice ethanol on the other.

Restricting sugarcane use, while allowing the use of surplus rice for ethanol, alludes to the appalling inconsistency in policy, overlooking crucial environmental and agronomic realities. While it is true that sugarcane is not procured through the FCI, both rice and sugarcane represent ecologically unsustainable agricultural pathways when examined through a systems lens. While both rice and sugarcane are high-input, water-intensive crops, the distinction lies in the source and impact of this water use. Sugarcane cultivation is more prominent in canal-fed regions like Maharashtra and Uttar Pradesh, while rice is heavily cultivated in Punjab and Haryana – India’s most groundwater-stressed zones (Sharma et al. 2018). The Central Ground Water Board classifies over 75% of districts in these states as overexploited. Continued rice cultivation here, supported by assured procurement, contradicts the principles of integrated water resource management (IWRM), as outlined in India’s own National Water Policy and poses a strategic risk to national water security.

Being a first-generation feedstock, rice exhibits a very low energy return on investment (EROI) compared to second-generation options like agri-residues (Mohammadi and Saddler 2023). Rice must be milled, parboiled, and fermented – adding multiple energy- and water-intensive steps. When the full lifecycle emissions are accounted for (post-harvest transport, processing, effluent treatment), the net environmental benefit of rice-based ethanol is negligible, if not negative (Borrion 2012). On the contrary, with its higher sucrose yield per hectare and established molasses-based ethanol infrastructure, sugarcane is relatively more energy-efficient. The government’s own Bioenergy Programme recognises that first-generation biofuels, particularly those derived from edible grains, carry net-positive land and water externalities.

Conclusion: Rethinking the biofuel path

The current cap on rice for ethanol production may seem modest, but even modest shifts in policy use-cases can create new incentive structures, particularly in systems with weak policy insulation – a classic case of ‘fixes that fail’ and ‘drifting to low performance’ archetypes of systems thinking. This is not a slippery slope fallacy but could be a precedent-setting event. Temporary relaxations becoming embedded architecture is a historically evidenced phenomenon in Indian agriculture, seen in cases of urea fertiliser subsidies (Bansal and Rawal 2020) and decontrol of sugar export quota (Bhardwaj and Jadhav 2025).

India’s surplus grain is a problem of design, not volume. The answer lies not in burning food for fuel, but in reforming procurement, distribution, and storage systems to channel excess toward nutritional, strategic, and humanitarian ends. Rather than expanding ethanol production through short-term interventions like cheaper rice sales, India should reorient its strategy towards second-generation biofuels (Jain and Sahu 2021). Utilising agricultural residues (for example, paddy straw, bagasse, corn cobs) offers an opportunity to not only shift to non-food-based feedstocks but also allow waste management of this abundant residue, which is mostly burnt and causes pollution. It is essential to establish clear feedstock criteria, including water footprint, yield per hectare, and land-use trade-offs. Additionally, to avoid discrepancies in decision-making and trade-offs between energy and food, there is an urgent need for institutionalising inter-ministerial coordination under a formal bioeconomy governance framework.

India’s biofuel mission is critical for energy security and climate action, but it cannot be pursued at the expense of food availability and ecological balance. As India navigates energy transitions under growing climate and food stress, sustainable biofuel policy cannot afford to be blind to resource interdependencies. The question is not whether we need biofuels – we do. The real question is: which biofuels, from which sources, and at what cost to people and the planet?

The views expressed in this post are solely those of the author and do not necessarily reflect those of the I4I Editorial Board.