Government allocates 78,000 tons of rice from FCI to Distilleries at subsidized rates


As per the information available, the Central Government has decided last month (15 June 21) to give 78,000 tons of rice from the Food Corporation of India (FCI) to the distilleries for the production of Ethanol for blending in the petrol (E-20 fuel) during the year 2020-21 at much subsidized rate of Rs 20 kg against the Economic Cost of the rice to FCI is Rs.37.26 per Kg. It means a loss of Rs.17.26 per quintal of rice to FCI. This is a huge loss to public exchequer by giving direct subsidy to the distilleries. 8 distilleries from Punjab, Haryana, Bihar and Madhya Pradesh have already contracted for procuring 66,000 tons of rice from FCI from which 3 crore liters of ethanol would be manufactured. Not only that. The BJP-led Central Government had decided to give a loan of Rs12,500 crore to distilleries. According to a media report, “the Food Ministry has given in-principle approval to 185 sugar mills and standalone distilleries to avail Rs 12,500 crore of loans for capacity addition of about 468 crore litre of ethanol per annum as part of its efforts to achieve 20 percent blending with petrol. In the last two years, 70 ethanol projects were sanctioned loans of Rs 3,600 crore. It is also extending financial assistance by way of interest subvention for 5 years at 6 percent maximum rate of interest against the loans availed by sugar mills/distilleries from banks for setting up their projects”. The main argument put forward by the central government is that petrol would be cheaper after blending with ethanol. This is a misleading argument. Petrol price is rising astronomically not because of higher production cost but due to imposition of hefty excise duties and VAT added by the central and state government. Excise duty on petrol has been raised from Rs 9.48 per litre in 2014 to Rs 32.90 a litre on 21 July. VAT on petrol has been raised from 20% in 2014 to around 30% in 2021. Taxes make up for 55.95 per cent of the present retail price of petrol as calculated on 5 July 2021. This means that if the price of petrol is Rs 100 per litre, taxes levied by the Modi government and state governments’ together account for Rs 55.95 per litre. The BJP-led central government collected Rs 3.89 lakh crore in excise duty in 2020-21, a 62 per cent growth from Rs 2.39 lakh crore collected in 2019-20. Bulk of this increased revenue is from taxes and cess on petrol. So, the very argument of the central government that petrol would be cheaper after blending with Ethanol is far from truth and purported to divert the attention of the people from the real cause of the abnormal spurt in fuel price.
Second point is when the common people are forced to buy rice at an average price of Rs.57 to 65 per kg in the retail market, why rice is offered from government stock to distilleries at Rs.20 per kg? Why cannot the central government offer the same rice to the common people at this abnormally reduced price? According to CMIE survey conducted in April 2021, around 97 percent of households’ incomes have declined since the beginning of the pandemic last year. The Global Hunger Index-2020 report has placed India 94th position among 107 countries. When people are hungry and there is excess stock of rice at the disposal of the government, what prompts the BJP government to be benevolent to the distilleries?
Before seeking an answer, another related fact is to be taken note of. As per estimates of the Union Ministry of Consumer Affairs, Food and Public Distribution, about 35 lakh tons of sugar will be diverted for ethanol production in the next sugar season, that is, October 2021 to September 2022. This, it is claimed, will go a long way in improving the financial conditions of the sugar mills. Further, the BJP government raised the price of ethanol extracted from sugarcane last year with a view to, what it said, giving “relief to the sugar sector, which has been affected by a persistent glut in the sugar market”. If there is persistent glut, how is that price of sugar in retail market is soaring? Who is reaping this super-profit other than the powerful sugar lobby by squeezing people’s pocket? So all relief is to the owners of sugar mills and sugar-Kulaks while common countrymen are back-broken by spiralling price-line.
Notable is another fact. According to the list of 418 distilleries, almost all privately owned, slated to receive financial assistance in order to expand their production infrastructure for generating ethanol from food grains including rice, more than 70 are located in Uttar Pradesh. Moreover, Uttar Pradesh is the largest sugar-cane producer in the country. The bulk of the sugar mills are in the private hands. And the BJP-ruled Uttar Pradesh would go to polls early next year.
So these measure of extracting ethanol from rice and sugar as well as granting substantial loan to the distilleries is nothing but another instance of how the policies of the BJP-government are premised on just one motto-‘Make the rich richer, the poor poorer. Help the corporates, neglect the downtrodden. Subsidize the capitalists, withdraw subsidy to the wretched millions.’

(Source- Free Press Journal 20-10-20, The New Financial Express, 30-10-20, 20-11-20, The Wire 06-07-21, Business Standard 29-05-21, Economic Times 31-05-21)

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