Chirag Patnaik

Rice to ethanol: the groundwater flow

Where India's procured rice goes, and how much irrigation water gets exported as motor fuel.

Sankey of FCI rice allocation to PDS, open market, ethanol distilleries, and stock buildup, annotated with embedded irrigation water.

India procured 54.5 million tonnes of rice in 2024–25. Of that, 5.2 Mt was allocated to ethanol distilleries at ₹22.50/kg — 54% of the government's own economic cost of ₹41.73/kg. Each kilogram of that rice carries roughly 3,800 litres of irrigation water, mostly pumped from Punjab and Haryana aquifers. The ethanol programme, at its full allocation, would export the equivalent of about 14 years of Delhi's municipal water supply — as motor fuel — every year.

Rice allocation, 2024–25 ethanol supply year · 54.5 Mt procured

Procured rice 54.5 Mt · 2024–25 FCI + state agencies Economic cost ₹41.73/kg ~207 billion m³ irrigation water PDS / NFSA 37 Mt · public distribution ~800 million beneficiaries OMSS & Bharat Rice 4.2 Mt · market & retail Ethanol distilleries 2.9 Mt utilised · 5.2 Mt allocated Issued at ₹22.50/kg ~11 billion m³ irrigation water = 1.36 billion L ethanol Stock buildup ~10.4 Mt · surplus to buffer Flow widths proportional to rice tonnage. Water estimates use 3,800 L/kg weighted by Punjab–Haryana share of procurement.

Water per litre of ethanol, by feedstock

~8,100 L

Rice embeds ~8,100 L irrigation water per litre of ethanol — the worst ratio among Indian feedstocks.

Maize is roughly 1,800–2,400 L/L (rainfed in most of its belt).

Sugarcane (molasses route) is 2,800–4,200 L/L — high, but the cane would be grown anyway for sugar; ethanol is a by-product of an existing crop.

Rice ethanol alone embeds water explicitly grown and pumped for this purpose.

The subsidy-per-litre question

₹19.23/kg

FCI's economic cost of rice is ₹41.73/kg. Distilleries buy it at ₹22.50/kg. The gap — ₹19.23/kg of procured rice — is absorbed by the food subsidy budget.

At 2.9 Mt utilised, that is ₹5,577 crore of food subsidy diverted into subsidising petrol blending in a single ESY.

At the 5.2 Mt allocation, the theoretical ceiling is ₹10,000 crore.

E20 trajectory and rice share

5.2 Mt → ?

India hit the 20% ethanol blending target in October 2025. The next mandate under discussion is E27 — which would require roughly 1,700 crore litres of ethanol annually, up from ~820 crore litres delivered in 2024–25.

With sugarcane diversion capped by FRP pressure and maize supply constrained, the residual pull falls on FCI rice. Every upward revision of the blending mandate is, implicitly, a decision to pump more Punjab groundwater into petrol tanks.

Methodology & sources