FCI Clarifies Rice Diversion in MP Ethanol Case Limited to 242.50 Quintals, Not 5 Lakh Tonnes as Reported

The Food Corporation of India on Monday clarified that it is investigating the alleged diversion of only 242.50 quintals of rice -- supplied for ethanol production in Madhya Pradesh in 2024-25 -- and not the massive quantities reported by certain sections of the media.

Some media reports had claimed that around 5 lakh tonnes of rice worth approximately ₹1,160 crore were diverted and misappropriated under the ethanol blending programme (EBP) in the state. The Food Corporation of India (FCI) rejected this, calling the reports "not only factually incorrect but also completely baseless".

"The investigation presently underway is not related to the entire quantity of rice supplied under the ethanol blending programme. It pertains to an alleged diversion of 490 bags (242.50 quintals) of rice involving an estimated value of about ₹5.63 lakh," the FCI said in a statement.

It also added that reports equating the entire value of rice supplied under the programme with the alleged diversion were "misleading".

The corporation said the ₹1,160 crore figure cited in media reports merely represents the value of rice legitimately issued by FCI against payment received from distilleries in Madhya Pradesh, and cannot be construed as the value of the alleged diversion.

According to FCI, during the 2024-25 ethanol supply year (ESY), which runs from November to October, 2.98 lakh tonnes of FCI rice was issued to Madhya Pradesh distilleries at ₹22.50/kg for ethanol production.

During ESY 2025-26, up to June 30, 2026, another 2.41 lakh tonnes was issued at ₹23.20/kg. This takes the total rice issued to distilleries since ESY 2024-25 to about 5.39 lakh tonnes.

The ₹1,160 crore figure in media reports, FCI explained, was arrived at by calculating the issue price of 5 lakh tonnes of rice at ₹23.20/kg on the assumption that the entire quantity had been misappropriated, whereas this amount actually represents payments made by distilleries to FCI for lawful lifting of rice.

FCI said the irregularity was flagged by government agencies themselves, with prompt action initiated well before the media reports surfaced.

Following the detection of irregularities in the movement of rice consignments in the first week of June 2026, FCI issued notices to the concerned distillery, and the state Food Department registered an FIR on June 5, 2026.

A Joint Inspection Team comprising officers of the Department of Food & Public Distribution (DFPD) and FCI carried out an on-site inspection on June 11, 2026, and established a prima facie linkage between recovered rice bags and consignments issued under the EBP.

Pending completion of the probe, FCI has withheld the security deposit of the distillery concerned and stopped further rice allocation to the firm.

The DFPD has directed NABARD to withhold the release of interest subvention to the firm.

The Madhya Pradesh government has constituted a Special Investigation Team (SIT) to probe the matter, and the Madhya Pradesh State Civil Supplies Corporation has imposed a penalty of ₹44.12 lakh and blacklisted the rice mill.

"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," FCI said, adding that the matter remains under investigation and appropriate action will be taken against all persons found responsible in accordance with the law