Govt body rejects ‘ ₹1,160 crore rice diversion for ethanol’ in Madhya Pradesh claim

Govt Body Rejects ₹1,160 Crore Rice Diversion Claim in Madhya Pradesh

Govt body rejects 1 160 crore - The government body has rejected claims of a ₹1,160 crore rice diversion for ethanol production in Madhya Pradesh. According to the Food Corporation of India (FCI), an investigation into the alleged misallocation of subsidized rice identified a diversion of only 242.50 quintals, valued at approximately ₹5.63 lakh. This stark contrast between the official findings and the circulated ₹1,160 crore figure has prompted the agency to label the latter as “not only factually incorrect but also completely baseless,” as reported by PTI.

Details of Ethanol Supply and Allegations

Under the ethanol blending initiative, the FCI supplied 2.98 lakh tonnes of rice to distilleries in the 2024-25 supply year at ₹22.50 per kg. By the end of June 30, 2026, an additional 2.41 lakh tonnes were allocated at ₹23.20 per kg, raising the total supply to around 5.39 lakh tonnes, per PTI data. However, some reports have suggested that a significantly larger quantity—5 lakh tonnes—was diverted for ethanol production, with an estimated value of ₹1,160 crore. The FCI has clarified that this figure does not align with the actual rice supplied to the ethanol program.

“The ₹1,160 crore figure refers to the total value of rice legally supplied to distilleries under the ethanol program,” the FCI stated, emphasizing that it cannot be equated to alleged diversion. This clarification aims to address the confusion and debunk the claim of a large-scale financial loss due to misallocation.

Investigation and Legal Measures

Government monitoring systems flagged discrepancies in rice movement during early June 2026, leading to the initiation of a probe. The Madhya Pradesh Food Department filed an FIR on June 5, and a joint team from the FCI and the Department of Food and Public Distribution conducted an inspection on June 11. As a result, the security deposit of the implicated distillery was withheld, and further rice allocations were suspended to prevent potential misuse.

The state government has established a Special Investigation Team (SIT) to delve deeper into the matter, while the civil supplies corporation has blacklisted the rice mill and imposed a ₹44.12 lakh penalty. These actions highlight the seriousness with which authorities are treating the alleged diversion, even as they clarify the discrepancy between the claimed and verified figures.

Scope of the Probe

What began as an inquiry into a single suspect truck has evolved into a broader investigation. Authorities are now examining 17 seized trucks, 56 rice mills, 22 ethanol plants, and over 50 witnesses to trace the full extent of any irregularities. The initial discovery of a truck parked inside a private mill instead of an ethanol plant sparked the inquiry, raising questions about the legitimacy of the rice processing claims.

Investigators are assessing whether the rice was used for ethanol production or secretly funneled through private mills to re-enter government storage. Police have uncovered a potential circular trade scheme, where ethanol plants allegedly sold subsidized rice to private millers for profit, then repackaged it and submitted it as “newly processed” rice to authorities. This scheme could have led to significant financial losses if not detected.

Verification Process

Officials are conducting a thorough verification process to cross-check the validity of the ₹1,160 crore claim. This involves comparing government dispatch logs, warehouse receipts, and transport records with the actual ethanol production data. The aim is to determine if the volume of rice processed aligns with the quantity supplied, ensuring transparency and accuracy in the supply chain.

Additionally, the verification process is scrutinizing electricity bills, machinery usage, and labor records at both distilleries and mills. These documents will help establish whether the operations were conducted as per the official allocations or if there were hidden activities contributing to the alleged diversion. The results of this verification are expected to provide clarity on the extent of the issue and the credibility of the claims.

Stakeholder Reactions and Implications

The rejection of the ₹1,160 crore claim has sparked discussions among stakeholders about the efficiency of the ethanol blending program. While the FCI insists that the diversion was minimal, some experts argue that even small discrepancies can have broader implications for the program’s success. The state government’s swift response, including the formation of a Special Investigation Team (SIT), underscores its commitment to resolving the issue and ensuring accountability.

For farmers and suppliers, the resolution of this dispute could impact their understanding of the program’s benefits. The ethanol blending initiative is designed