Four arrested as SIT probes diversion of FCI ethanol rice to private mills in Madhya Pradesh
A Special Investigation Team in Madhya Pradesh has arrested four people over the alleged diversion of subsidised Food Corporation of India rice meant for an ethanol plant. The grain, dispatched from a warehouse in Balaghat to a distillery in Chhindwara, is suspected to have been rerouted to private mills. The case draws attention to India's food-grain allocation and ethanol feedstock policy.
SIT arrests four in Madhya Pradesh rice case
A Special Investigation Team (SIT) in the central Indian state of Madhya Pradesh has arrested four people in connection with the suspected diversion of subsidised rice supplied by the Food Corporation of India (FCI). The grain had been dispatched from an FCI warehouse in the state's Balaghat district to an ethanol plant in neighbouring Chhindwara, but is suspected of having been rerouted to private mills instead of being processed into fuel.
The case, reported from Bhopal, involves large quantities of rice allocated as feedstock for ethanol production. Investigators suspect that consignments intended for the distillery did not reach it as fuel-grade feedstock and instead ended up in private milling channels, where rice can be sold on the open market at a higher value than subsidised grain.
How the alleged diversion worked
Under the scheme being examined, FCI stock left the Balaghat warehouse on paper as raw material for the Chhindwara ethanol unit. Diverting such consignments to private mills would allow the grain to re-enter commercial trade rather than being converted into fuel. The SIT has made four arrests so far and is continuing to trace the movement of the rice and the parties involved.
The precise volumes, the value of the grain and the full list of entities under scrutiny have not been detailed in the initial account. Investigators are focused on how rice booked for an industrial buyer moved across district lines from Balaghat to Chhindwara and where it ultimately went.
Why ethanol feedstock is sensitive
The FCI manages India's central pool of food grains, procuring and distributing rice and wheat for the public distribution system and other government programmes. In recent years India has also allowed surplus FCI rice to be supplied to distilleries as feedstock for its ethanol blending programme, which aims to raise the share of ethanol mixed into petrol and reduce reliance on imported crude oil.
That policy links two priorities that are normally kept separate: subsidised food-grain stocks and industrial biofuel supply. Rice allocated for ethanol is priced and tracked differently from grain meant for consumption, which creates an incentive to move cheaper industrial-channel stock back into the open food market. The case in Madhya Pradesh points to the enforcement challenge of keeping these two streams apart.
Implications for grain markets and trade
For domestic buyers and traders, diversion of subsidised rice into private mills distorts local pricing, because grain accounted for at concessional rates competes against fully priced supply. For the ethanol programme, feedstock that fails to reach distilleries can tighten the raw material available for fuel production and complicate the accounting behind India's blending targets.
- Rice moved from an FCI warehouse in Balaghat, Madhya Pradesh.
- Intended destination was an ethanol plant in Chhindwara.
- Consignments are suspected of being diverted to private mills.
- The SIT has arrested four people and the probe is ongoing.
India is a major producer and exporter of rice, and the integrity of its food-grain allocation system matters to global buyers who track New Delhi's stock levels and export policy. Cases of leakage from subsidised channels feed into wider scrutiny of how much grain is genuinely available for domestic use, industrial feedstock and export. The outcome of the SIT probe may influence how tightly the flow of FCI rice to ethanol units is monitored going forward.
