Food Corporation of India (FCI) on Tuesday rejected media reports claiming that government rice worth ₹1,160 crore meant for ethanol production had been diverted in Madhya Pradesh, calling the reports "factually incorrect" and "completely baseless".
In a press release, FCI said the ongoing investigation pertains only to the alleged diversion of 490 bags (242.50 quintals) of rice valued at around ₹5.63 lakh, and not to the entire quantity of rice supplied under the Centre's ethanol blending programme.
"The figure of ₹1,160 crore merely represents the value of rice legitimately issued by FCI against payments received from the concerned distilleries in Madhya Pradesh and cannot be construed as the value of the alleged diversion," the corporation said.
According to the FCI, around 2.98 lakh metric tonnes (LMT) of rice were supplied to distilleries in Madhya Pradesh during Ethanol Supply Year (ESY) 2024-25 at ₹22.50 per kg, while another 2.41 LMT was supplied during ESY 2025-26 (up to 30 June) at ₹23.20 per kg. The total supply of about 5.39 LMT formed the basis of the ₹1,160-crore figure cited in some media reports, the corporation said.
SIT investigation underway
The clarification comes amid an ongoing investigation by a Special Investigation Team (SIT) into the alleged diversion of subsidised rice meant for ethanol production.
Four people have been arrested so far, according to media reports quoting a senior police officer associated with the SIT. Around 20 trucks allegedly carrying diverted government rice have also been seized, while nearly 40 people, including rice millers, transporters and ethanol plant personnel, have been questioned.
Investigators have also issued notices to at least six rice mills in Balaghat and Seoni districts of Madhya Pradesh and Gondia district of Maharashtra as part of the widening probe.
The investigation stems from an FIR registered after a consignment of subsidised rice dispatched from the FCI's Navegaon warehouse in Balaghat district to AVJ Agrico Pvt Ltd's ethanol plant in Chhindwara was allegedly found at Sancheti Rice Mill in Waraseoni instead of reaching its designated destination.
How case came to light
According to investigators, the case first came to light on 3 June after a truck carrying 242.50 quintals of government rice was intercepted during a joint inspection by officials from the revenue and food departments. The district administration subsequently informed the Balaghat police, which registered an FIR and constituted the SIT.
The FCI, however, stressed that the investigation is limited to the alleged diversion detected so far and does not relate to the entire quantity of rice supplied under the ethanol blending programme.
The corporation also outlined the action taken after the alleged irregularity was detected. It said notices were issued to the concerned distillery during the first week of June, while the State Food Department registered an FIR on 5 June.
A joint inspection team comprising officials from the Department of Food and Public Distribution (DFPD) and the FCI conducted an on-site inspection on 11 June and established a prima facie link between the recovered rice bags and consignments issued under the Ethanol Blending Programme (EBP), the corporation said.
Pending completion of the investigation, the FCI has withheld the security deposit of the concerned distillery and stopped further allocation of rice to the firm. The DFPD has also directed NABARD to withhold the release of interest subvention.
The corporation further said the Madhya Pradesh State Civil Supplies Corporation had imposed a penalty of ₹44.12 lakh on the concerned rice mill and blacklisted it, while the state government had constituted an SIT to investigate the case.
What is Centre's ethanol blending programme
"The facts clearly establish that the alleged irregularity was identified by the Government's own monitoring mechanism and that timely administrative and legal action has already been initiated. The matter continues to be under investigation, and appropriate action will be taken against all persons found responsible in accordance with the law," the FCI said.
Under the Centre's ethanol blending programme, surplus and broken rice from FCI stocks are supplied to registered distilleries through the Open Market Sale Scheme (OMSS) to support India's target of achieving 20% ethanol blending in petrol.
