India is considering a proposal to expand the sale of broken rice from state stockpiles into the open market, according to people familiar with the matter, a move that may boost supplies of the grain for exports and ethanol production.
The world’s top exporter launched a pilot program earlier this year to cut the proportion of broken grains in rice distributed through its food program to 10 percent from 25 percent, diverting the remainder for industrial use.
The plan is expected to help state-run Food Corporation of India trim its bulging reserves and free up some space for the upcoming harvest, as well as improve supplies of the raw material for ethanol makers, said the people who asked not to be named as the information isn’t public.
Under the current system, the food agency purchases unmilled rice from farmers at guaranteed prices and gives it to private millers for processing. The rice it receives in return often contains up to a quarter of broken grains.
A food ministry spokesperson didn’t immediately respond to a request for comment.
The initiative will help Indian households receive better-quality rice under the free food program, while the FCI can reduce its storage costs. At the same time, the ethanol sector stands to gain from cheaper raw material as extra supplies of broken rice flow into the market.
The move could also ease the pressure on sugar mills to ramp up production of the green fuel from cane juice. That, in turn, may boost sugar output and prompt the government to consider allowing more exports of the sweetener.
India’s rice stockpiles have surged to their highest for this time of year in at least two decades, raising concerns about storage shortages as another record harvest approaches. The overflowing reserves—now equal to more than a tenth of annual global production—are proving a challenge for the world’s second-largest producer, with authorities scrambling to create more storage space.
Forecasts of above-average monsoon rains have further fueled expectations of yet another bumper crop, intensifying worries that excess grain could rot in open storage yards.
The government’s rice inventories totaled almost 38 million tons last month, according to FCI. It also held more than 32 million tons of the unprocessed grain, equivalent to about 22 million tons of rice, data showed. The country maintains wheat and rice reserves for various welfare programs, including 5 kilograms of free grains per person every month to about 800 million people.
India has decided to increase the price of rice sold from state reserves to ethanol producers to 23,200 rupees ($270) per ton, according to a local media report. That’s still more than 30 percent cheaper than similar varieties in the local market, as well as from Thailand, Vietnam, and Pakistan. Additional sales from state reserves could make Indian rice even more competitive abroad, intensifying pressure on rival exporters.
That would likely push global prices lower, benefiting poorer households in African nations such as Senegal and Ghana, as well as animal feed and ethanol producers in China—all major buyers of broken rice in the global market.
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