FCI disputes Rs 1,160-cr ethanol scam claim, admits rice diversion probe underway

New Delhi: The Food Corporation of India (FCI) has sought to downplay reports of an alleged Rs 1,160-crore rice diversion under the Ethanol Blending Programme (EBP) in Madhya Pradesh, maintaining that the investigation currently relates to the alleged diversion of only 242.50 quintals of rice worth about Rs 5.63 lakh.

However, the clarification stops short of disputing that an alleged diversion took place. Instead, FCI's rebuttal is centred on the scale of the alleged irregularity, arguing that media reports wrongly treated the entire quantity of rice supplied under the programme as having been misappropriated.

Follow The PSUWatch Channel on WhatsApp

In a statement issued on Monday, the corporation described reports claiming that nearly five lakh tonnes of rice worth around Rs 1,160 crore had been diverted as "factually incorrect" and "completely baseless". According to FCI, the ongoing investigation concerns only 490 bags, or 242.50 quintals, of rice supplied to a distillery under the ethanol programme during the 2024-25 Ethanol Supply Year (ESY).

The corporation said the Rs 1,160-crore figure merely represents the value of rice legitimately issued by FCI to distilleries against payment received, and not the value of the alleged diversion. It said Madhya Pradesh distilleries lifted 2.98 lakh tonnes of rice during ESY 2024-25 at Rs 22.50 per kg and another 2.41 lakh tonnes up to June 30 of ESY 2025-26 at Rs 23.20 per kg, taking the cumulative allocation since ESY 2024-25 to about 5.39 lakh tonnes.

While contesting the valuation of the alleged scam, FCI itself confirmed that government agencies detected irregularities in the movement of rice consignments in the first week of June. It said notices were issued to the concerned distillery and an FIR was registered by the Madhya Pradesh Food Department on June 5.

A Joint Inspection Team comprising officials of the Department of Food and Public Distribution (DFPD) and FCI subsequently conducted an inspection on June 11 and, according to the corporation, established a prima facie linkage between recovered rice bags and consignments issued under the Ethanol Blending Programme.

Follow The PSUWatch Channel on WhatsApp

The corporation has also acknowledged that multiple punitive measures have already been initiated. These include withholding the security deposit of the distillery, suspending further rice allocation to the firm, and directing NABARD to withhold interest subvention.

Separately, the Madhya Pradesh government has constituted a Special Investigation Team (SIT) to investigate the case, while the Madhya Pradesh State Civil Supplies Corporation has imposed a penalty of Rs 44.12 lakh and blacklisted the rice mill concerned.

Although FCI has rejected reports projecting a Rs 1,160-crore diversion, its clarification does not explain how the alleged diversion of rice occurred despite the monitoring mechanisms governing the ethanol supply chain. Nor does it identify those under investigation or indicate whether the probe has been widened beyond the quantity initially detected.

Follow PSU Watch on LinkedIN

The corporation maintained that the irregularity was detected through the government's own monitoring system and said the investigation is continuing. It added that appropriate action would be taken against all those found responsible after the probe is completed.

(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated)