Government to Sell FCI Rice for Ethanol at Rs 2,320/qtl, Below Paddy MSP; OMSS Policy 2026-27 Announced

The Central government has announced a policy for the sale of wheat, rice and coarse grains from stocks managed by the Food Corporation of India (FCI) under the Open Market Sale Scheme - Domestic (OMSS-D) for 2026-27. The policy, effective from July 1, 2026, to June 30, 2027, sets different reserve prices for foodgrain sales to private traders, state governments, community kitchens, cooperatives and ethanol distilleries.

One of the most significant provisions of the new policy is the sale of rice from FCI stocks to ethanol distilleries at Rs 2,320 per quintal until October 31, 2026. From November 1, the reserve price will increase to Rs 2,390 per quintal. The quantity to be supplied for ethanol production will be decided by the Committee of Ministers, according to the policy order issued by the Department of Food and Public Distribution on July 2.

The policy has raised questions because the Central government procured paddy from farmers at an MSP of Rs 2,369 per quintal during the 2025-26 season. Now, rice from FCI stocks will be supplied to ethanol distilleries at Rs 2,320 per quintal until October 31. The government has fixed the Minimum Support Price (MSP) for common-grade paddy at Rs 2,441 per quintal for the 2026-27 crop season.

The substantial gap between the estimated economic cost and the reserve price is likely to intensify the debate over the use of public foodgrain stocks for ethanol production. Concerns may also arise over the possible impact of such subsidised sales on the open market.

Rice Costing Rs 4,100 per Quintal to Be Sold at Rs 2,320

A quintal of paddy generally yields around 67 kg of rice under the standard milling out-turn ratio. Apart from the MSP paid for paddy, the government incurs procurement costs, milling charges, storage and transportation expenses, among other costs.

After accounting for these expenses, the estimated economic cost of rice works out to around Rs 41 per kg, or approximately Rs 4,100 per quintal. In simple terms, rice with an estimated economic cost of around Rs 4,100 per quintal will be supplied for ethanol production at Rs 2,320 per quintal.

The government claims that ethanol production will help increase farmers’ incomes. But the pricing under the new OMSS Policy 2026-27 raises some serious questions. When the government sells rice for ethanol production at a price even lower than the MSP of paddy, how will farmers get better prices for their produce? At a time when concerns persist over monsoon performance and global uncertainties, what is the rationale for selling rice from public stocks for ethanol production at nearly half its estimated economic cost?

The OMSS policy, however, stipulates that old or broken rice should be used for supplying ethanol distilleries to the extent feasible. It also states that the quantity and timing of rice offloading will be determined by FCI in consultation with the Department of Food and Public Distribution after providing for Public Distribution System (PDS) requirements, buffer stock norms and an additional 30 lakh tonnes for emergencies.

Rice at Rs 2,320 per Quintal for States

Under the OMSS policy, rice will also be supplied to state governments and community kitchens at Rs 2,320 per quintal until October 31 and Rs 2,390 per quintal thereafter. The sale of rice to state governments has been restricted to non-surplus states requiring additional supplies for their own notified schemes.

For rice with 25 per cent broken grains from the 2025-26 Kharif Marketing Season, the reserve price for private parties and cooperatives has been fixed at Rs 2,890 per quintal until October 31 and Rs 2,970 per quintal from November 1, 2026, to June 30, 2027.

Small private traders, entrepreneurs and individuals will also be able to purchase rice from FCI depots at Rs 2,890 per quintal until October 31 and Rs 2,970 per quintal thereafter.

For retail sale under the ‘Bharat’ brand, rice will be supplied to NAFED, NCCF and Kendriya Bhandar at Rs 2,480 per quintal until October 31 and Rs 2,550 per quintal thereafter. The reserve prices for rice from FCI stocks include transportation costs.

The policy also provides for the sale of Custom Milled Rice with 10 per cent broken grains under the Rice Milling Transformation Scheme at Rs 3,090 per quintal until October 31 and Rs 3,180 per quintal thereafter.

Wheat Reserve Price Fixed at Rs 2,600 per Quintal

For wheat, the government has fixed the OMSS reserve price at Rs 2,600 per quintal for Fair Average Quality (FAQ) grain and Rs 2,585 per quintal for Under Relaxed Specifications (URS) grain. The prices will remain valid until June 30, 2027, but transportation costs will be charged separately. The wheat MSP for the 2026-27 Rabi Marketing Season was fixed at Rs 2,585 per quintal.

The wheat reserve prices apply to sales through e-auctions to private parties as well as sales to eligible state governments, community kitchens and central cooperative organisations for retail sale under the Bharat brand.

The government has stipulated that no wheat sales will be undertaken in procuring regions during the procurement period. However, the sale of wheat to central cooperative organisations will be allowed in both procuring and consuming regions during the wheat procurement period.

The quantity and timing of wheat sales will be determined by FCI in consultation with the Department of Food and Public Distribution after meeting PDS requirements, prescribed buffer stock norms and maintaining an additional emergency reserve of 20 lakh tonnes.

Reserve Prices for Coarse Grains

The government has also set OMSS reserve prices for coarse grains. Bajra will be offered to private parties through e-auction at Rs 2,900 per quintal, ragi at Rs 5,205 per quintal, jowar at Rs 4,023 per quintal and maize at Rs 2,410 per quintal. Transportation charges will be added separately to these reserve prices.

The OMSS policy has been announced at a time when the government is holding substantial stocks of both wheat and rice. At the same time, global geopolitical tensions, elevated crude oil prices, the possible emergence of El Niño and concerns over monsoon performance have kept risks to food production and inflation in focus.