Centre's 'Surplus' Rice to Ethanol Move Goes Back to a March Meeting Chaired by Modi

The decision, which has been severely criticised as it comes in the wake of rising hunger in the country, was defended by the government as being needed to manufacture alcohol-based hand sanitisers.

New Delhi: A high-level meeting chaired by Prime Minister Narendra Modi on March 3, 2020 all but cleared the way for the government’s much-criticised decision to convert ‘surplus’ rice to ethanol, information obtained by The Wire via the Right to Information (RTI) Act has revealed.  

The decision to allow the conversion of ‘surplus’ rice to ethanol was announced by the Centre on April 20 and has faced severe criticism because it comes at a time when food insecurity has grown across the country as millions have lost their livelihoods due to the COVID-19 setback to the economy. 

Some experts have even called the move ‘unethical’.  

The meeting which paved the way for the conversion was held at the Prime Minister’s Office (PMO) and the agenda was to discuss “surplus stock of food-grains and opportunities for augmentation of ethanol production”, documents made available by the Ministry of Petroleum and Natural Gas show. 

It was decided in this meeting that the agriculture ministry, in consultation with the food and public distribution ministry, “should take suitable decision to allow conversion of old stock of surplus rice to ethanol”. 

A former top bureaucrat at one of these ministries said, “this implies that in principle permission for conversion of surplus rice to ethanol was given”. 

Also read: How Have the Centre’s Food Distribution Schemes Performed So Far?

After the March 3 meeting, another meeting of the secretaries’ committee was held on the issue on March 9. The recommendations made by the committee in this meeting were approved by minister for consumer affairs, food and public distribution Ram Vilas Paswan and finance minister Nirmala Sitharaman. 

The committee recommended that ‘surplus’ rice be used for conversion to ethanol. It also recommended that the rice be issued at Rs 2,250 per quintal (which is the open market sale scheme rate), well below the economic cost of rice as per the Food Corporation of India which is Rs 3,726 per quintal

Ethanol RTI response by The Wire on Scribd

Hand sanitiser defence

This information is significant because the Centre has so far maintained that the decision to convert ‘surplus’ rice to ethanol was partly taken with a view to manufacturing alcohol-based hand sanitisers as they are an important tool in preventing the spread of COVID-19. 

In an interview to The Wire, Paswan explained the rationale behind allowing the conversion of ‘surplus’ rice to ethanol at a time when millions of Indians could be pushed into poverty and food insecurity, by saying, “In today’s situation, every person needs protection from the coronavirus infection. Please change this thought process that sanitiser is only for the rich. The government’s intention is that sanitiser should be easily available for every person. For this, it is necessary to increase the production of sanitisers.” 

Even the government’s official announcement – which came on April 20 – that it has allowed the conversion said that the ‘surplus’ rice with FCI may be used to produce ethanol for the manufacture of alcohol-based hand sanitisers. 

However, the documents accessed by The Wire via RTI reveal that seeds of this idea can be traced back to, at the very minimum, the March 3 meeting chaired by Modi and then the the secretaries’ committee meeting on March 9. The latter meeting recommended that ‘surplus’ rice be used for conversion to ethanol at the specified price of Rs 2,250 per quintal. 

This happened at a time when the total number of COVID-19 cases in India was less than 50 and the government of India did not recognise the coronavirus pandemic as a health emergency. In fact as late as March 13, the government of India insisted that COVID-19 was “not a health emergency”.

Women carry free ration collected from a fair price shop during the ongoing COVID-19 nationwide lockdown, in East Delhi, Wednesday, May 6, 2020. Photo: PTI

So, the government had allowed but not announced the conversion of ‘surplus’ rice to ethanol before it recognised COVID-19 as a serious risk. “It’s likely that they had decided for other reasons and tried to explain it with the hand sanitiser logic later,” the former top bureaucrat quoted above, who did not want to be identified, told The Wire

What also flies in the face of this argument is that the alcohol-based sanitisers continue to attract a whopping 18% Goods and Services Tax rate, a decision that the finance ministry has defended by saying is in the interests of local manufacturers and the broader Atmanirbhar project. 

Petrol blending another reason

It is also interesting to note that in the pages made available by the Ministry of Petroleum and Natural Gas – which include the minutes of the April 20 meeting of the National Biofuel Coordination Committee (NBCC), after which the decision to allow the conversion of ‘surplus rice’ was announced – the phrase ‘alcohol-based sanitiser’ does not find any mention. 

RTI: Ministry of Petroleum on Ethanol by The Wire on Scribd

This is particularly curious as the press release after this meeting said the decision was taken with a view to utilising the ethanol to manufacture alcohol-based hand sanitisers and in blending petrol. 

The minutes of the meeting – which was attended by minister for petroleum and natural gas Dharmendra Pradhan, NITI Aayog CEO Amitabh Kant, secretary of the ministry of consumer affairs, food and public distribution, secretary of the ministry of agriculture and others – do not mention the manufacture of hand sanitisers from ethanol. They do, however, mention a shortfall in the availability of ethanol for the ethanol blended programme (EBP). 

Also read: How India Can Leverage Surplus Food Grain to Expand PDS Without Sacrificing Fiscal Prudence

The minutes say that while the total ethanol requirement under the EBP is 260 crore litres, offers for supply of only 185 crore litres have been received by oil marketing companies (OMCs). This 260 crore litres figure was announced by Pradhan last year as the potential target of ethanol to be supplied for blending with petrol to achieve 7% blending level. 

The Ministry of Consumer Affairs, Food and Public Distribution said, as per the minutes of the meeting, that the shortfall (75 crore litres) can be met as 75 crore litres of installed capacity for production of ethanol from food grains is presently available. The ministry also said that for utilisation of this capacity two million tonnes of ‘surplus rice may be required’. 

As of April – when the meeting was held – FCI held about 32 million tonnes of rice. So, the Ministry of Consumer Affairs, Food and Public Distribution suggested that slightly more than 6% of the stock at that time be used for conversion to ethanol. 

The documents do not contain details of what quantities of rice have actually been allocated so far for conversion to ethanol. 

The Wire has also filed another RTI on the same issue with the Ministry of Consumer Affairs, Food and Public Distribution asking for the quantity of rice allocated for this purpose. That question has not yet been responded to. 

The only information the ministry provided was that 180 crore litres of ethanol can be produced from 40 lakh metric tonnes, or four million tonnes, of rice and that this is the first time that ‘surplus’ stock of rice is being used for conversion to ethanol.