Rice worth ₹1,160 cr diverted in MP ethanol scam? FCI rejects reports, says probe over ₹5.63 lakh

The Food Corporation of India (FCI) has strongly rejected reports suggesting that rice worth Rs 1,160 crore meant for ethanol production was diverted in Madhya Pradesh, calling such claims 'factually incorrect' and 'completely baseless'.

The agency clarified that the ongoing investigation concerns an alleged diversion of rice valued at around Rs 5.63 lakh, not the entire quantity supplied to ethanol distilleries.

The controversy erupted after a truck transporting FCI rice to an ethanol plant was allegedly found inside a private rice mill in Balaghat district, triggering a wider investigation.

Authorities subsequently expanded the probe, examining multiple ethanol plants, rice mills and transport vehicles to determine whether government rice supplied under the ethanol blending programme had been diverted.

According to FCI, several media reports wrongly assumed that nearly five lakh metric tonnes of rice issued to distilleries had been misappropriated.

The corporation said the widely cited Rs 1,160 crore figure simply reflects the legitimate payments made by distilleries to procure rice from FCI and should not be interpreted as the value of the alleged diversion.

Why FCI says the Rs 1,160 crore figure is misleading

FCI explained that around 5.39 lakh metric tonnes of rice have been supplied to distilleries in Madhya Pradesh since the 2024-25 Ethanol Supply Year under the government's ethanol blending programme.

Of this, about 2.98 lakh tonnes were issued during ESY 2024-25 at Rs 22.50 per kg, while another 2.41 lakh tonnes were supplied until June 30 of ESY 2025-26 at Rs 23.20 per kg.

The corporation said the Rs 1,160 crore estimate was calculated by multiplying roughly five lakh tonnes of rice with the issue price of Rs 23.20 per kg, creating the impression that the entire stock had been siphoned off. FCI stressed that this amount actually represents the value of rice lawfully lifted by distilleries after making payments to the corporation.

It clarified that investigators are instead examining the alleged diversion of 490 bags of rice, equivalent to about 242.5 quintals, whose estimated value is approximately Rs 5.63 lakh.

Probe widens after truck found at rice mill

The investigation began after officials discovered irregularities in the movement of rice consignments destined for an ethanol unit.

One truck carrying FCI rice was reportedly traced to a private rice mill instead of the designated distillery, prompting a joint inspection by revenue, food and police officials.

Police have since registered an FIR, and the Madhya Pradesh government has constituted a Special Investigation Team (SIT) to examine the case.

Investigators are scrutinising records of 22 ethanol plants across 17 districts, along with dozens of rice mills and transport vehicles, to verify whether subsidised rice supplied for ethanol production was used for its intended purpose.

Officials are analysing transport records, warehouse data, software logs and statements of those connected to the supply chain. The investigation has already led to multiple arrests, while more accused have been identified.

FCI maintained that the alleged irregularity was detected through the government's own monitoring mechanism well before the issue surfaced in media reports.

Following the discovery in early June, notices were issued to the concerned distillery and an FIR was registered on June 5.

A joint inspection by officials from the Department of Food and Public Distribution and FCI later established a prima facie link between the recovered rice bags and consignments supplied under the ethanol blending programme.

Pending the outcome of the investigation, FCI has suspended further rice allocations to the concerned distillery and withheld its security deposit.

The Department of Food and Public Distribution has also directed the National Bank for Agriculture and Rural Development to withhold interest subvention to the company, while the Madhya Pradesh State Civil Supplies Corporation has imposed a penalty of Rs 44.12 lakh and blacklisted the rice mill allegedly involved.

FCI reiterated that the investigation remains ongoing and said strict legal action will be taken against all those found responsible once the probe is completed.