Reducing the price of rice for ethanol production is imprudent

Denying the rightful price for paddy to farmers as recommended by the Swaminathan Committee, but at the same time, subsidising rice for ethanol production that adversely affects food security, intensifies water scarcity and hurts the environment, reflects the lop-sided priorities of the government

paddy field farming farmer

To

Dr Suman K Bery

ViceChairman

Niti Ayog

Dear Dr Bery,

I have come across a news report  that the government has decided to reduce the price of rice for ethanol production, ostensibly to encourage ethanol production and reduce dependence on oil imports.

I consider the decision to be imprudent for the following reasons:

  1. The present Minimum Support Price (MSP) for Paddy, as determined on the basis of the recommendation of the Commission for Agricultural Costs & Prices (CACP), is Rs 2,250/ Quintal, as against a price of Rs 3,000/ Quintal, arrived at (https://cacp.da.gov.in/) on the basis of the formula recommended by the Swaminathan Commission (C2 = Cost of inputs + workers’ wages + land-related costs). In other words, the farming community that is instrumental in safeguarding food security is being paid Rs 750 less per every quintal produced for the nation (https://countercurrents.org/2024/02/welcome-award-of-bharat-ratna-to-dr-m-s-swaminathan-implement-minimum-support-price/)

    There is thus a strong case for compensating the farmer, rather than subsidising profit-earning private industrial units that consume rice as a raw material. The latest decision to reduce the price of rice for ethanol producers indicates that it is more concerned about enriching private ethanol producers than safeguarding the financial viability of farming as a strategic economic activity
  2. The decision to sell rice at Rs 2,250/ Quinal to ethanol producers implies a subsidy of Ra 750/ Quintal, apart from around 24 lakh tonnes of rice meant for low-income families being diverted for industrial use.  While use of ethanol as a partial substitute for imported oil would reduce the country’s dependence on oil, ethanol production based on biofuels, such as rice and non-edible oils,diverts the use of land from food crops to other usesadversely affects food security, intensifies water scarcity and hurts the environment. Unless the land vs water vs food security trade-offs that ethanol production necessarily involves are analysed carefully and properly addressed, indiscriminate incentives for ethanol production to reduce dependence on imported oil would prove counter-productive in the long-run (https://countercurrents.org/2023/09/global-biofuel-alliance-at-g20-land-vs-water-vs-food-security-has-the-government-addressed-the-trade-offs/). While it may reduce oil imports marginally, it will hurt food security, intensify water scarcity and adversely affect the environment. 

I am not sure whether the government has consulted Niti Ayog before taking an important decision on diverting FCI procured rice for ethanol and on fixing its sale price. Had the government sought Niti Ayog’s prior view in the matter, Niti Ayog would perhaps have pointed out the implications as indicated by me above.

Even at this belated stage, I would request Niti Ayog to intervene and advise the concerned authorities to adopt an approach that is prudent in the long run.

Regards,

Yours sincerely,

E A S Sarma

Former Secretary to the Government of India

Visakhapatnam

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