Priyank Kharge flags cost concerns over rice diversion for ethanol production

Karnataka Home Minister Priyank Kharge on Aug 25 questioned the Centre’s policy of selling rice procured with taxpayers’ money to ethanol producers at prices around 40 per cent lower than its acquisition cost.

In a statement, Kharge said, “India’s ethanol arithmetic simply does not add up”, while questioning the economic rationale behind diverting foodgrains meant for food security towards ethanol production.

He pointed out that the government procures paddy from farmers using taxpayers’ money and subsequently incurs additional expenditure on storing and transporting the grain. Despite these costs, the rice is then reportedly sold through the Food Corporation of India (FCI) to ethanol producers at a price significantly below its acquisition cost.

“What kind of economic policy is this?” Kharge asked, questioning who ultimately benefits from the system.

“Grain is subsidised with taxpayers’ money; the government bears the cost of procurement, storage and transportation; and then the same grain is sold to ethanol producers at a discounted price. So, who is actually benefiting from this entire system?” he asked.

Kharge also questioned whether large quantities of foodgrains were being diverted towards ethanol production primarily to provide raw material for ethanol manufacturing capacity that had been created rapidly.

He further questioned the economics of the government purchasing ethanol from producers at higher prices and blending it with petrol after supplying them with grain at subsidised rates.

“If grain is supplied at a lower price and ethanol is subsequently purchased from the same industry at a higher price, what is the actual benefit to the ordinary consumer?” he asked.

Kharge also raised questions over whether ethanol blending has resulted in lower petrol prices for consumers and whether its impact on vehicle mileage and maintenance costs has been adequately assessed.

“Who is subsidising whom? Who are the real beneficiaries of this system?” Kharge asked, saying the Centre must provide a clear answer.

He demanded that the Centre transparently account for the economic, social and public-interest implications of diverting foodgrains earmarked for food security towards ethanol production.

Reiterating his contention, Kharge said the “ethanol arithmetic of India does not add up” and argued that the apparent contradictions in the Centre’s ethanol policy needed to be placed before the public.

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