India: Government offloads record 5.6 mnt of rice to bulk buyers

• Central pool surges past 47 mt, over 3.5 times buffer norm
• FY’25 stock build-up to cost govt additional INR 22,000 crore

In one of its most aggressive disposal drives to date, the Food Corporation of India (FCI) has offloaded a record 5.6 million tonnes (mnt) of rice to bulk buyers this fiscal year through open market operations and special allocation schemes. The move underscores the government’s effort to ease swelling grain inventories even as procurement continues at a rapid pace. Last year, FCI had sold 4.63 mnt, making the current year’s volume its highest evaer.

Expanding stock despite record offloads

Despite the record sales, rice stocks in the central pool remain elevated at 47 mnt, more than 3.5 times the prescribed buffer norm of 10.25 mnt as of 1 October. The persistent surplus highlights the imbalance between procurement and distribution. While the government continues to purchase rice under the Minimum Support Price (MSP) regime to support farmers, offtake under welfare schemes has failed to keep pace.

During the current fiscal, around 52-53 mnt of paddy has been procured, while annual offtake under schemes such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) and other welfare programmes remains in the range of 36-38 mnt. The mismatch has led the government to rely heavily on the Open Market Sale Scheme (OMSS), ethanol allocations, and state sales to trim excess inventories.

Government allocations, market response

Between 1 April and 8 October, FCI allocated 2.46 mnt for ethanol production, 2.06 mnt for state welfare programs, 1.03 mnt through e-auctions, and 0.06 mnt under the Bharat Rice initiative. These combined allocations surpass the total 4.63 mnt offloaded during FY’24. Officials expect total sales for FY’25 to reach 6-7 mnt, marking a 50% increase from the previous year.

Reserve prices have been set at INR 2,250 per quintal for ethanol and state allocations, INR 2,400/quintal for Bharat Rice, and INR 2,800/quintal for bulk e-auction lots, applicable through 31 October 2025. The economic cost of rice — including procurement, transport, and storage — currently stands at INR 41.73/kg, raising concerns about the cost of maintaining excess stocks.

Fiscal implications of surplus stocks

The accumulation of rice far beyond buffer requirements has major fiscal implications. The government’s food subsidy outlay for FY’25 is budgeted at INR 2.03 lakh crore, but officials estimate an additional INR 22,000 crore may be required to cover higher storage and handling costs if current stock levels persist. The swelling inventory not only strains warehousing capacity but also delays liquidation efforts for older stock, potentially affecting grain quality and increasing carrying costs.

Demand, policy challenges

While PMGKAY remains a critical channel for grain distribution — providing 5 kg of food grains monthly to 810 million beneficiaries — its absorption capacity is limited compared to annual procurement. The programme, extended until 2028 with an estimated cost of INR 11.8 trillion, will continue to anchor rice demand, but it cannot fully offset the build-up in the central pool.

Industrial demand, particularly from ethanol manufacturers, has provided some relief, but its scale remains small relative to the overall surplus. Meanwhile, export options are constrained by government restrictions and subdued global demand. Procurement for the ongoing kharif marketing season has already begun strongly, with 3.41 mnt purchased so far compared with 0.91 mnt during the same period last year, keeping upward pressure on inventories.

Outlook

India’s rice market faces a growing structural imbalance. Persistent high procurement, limited domestic absorption, and restricted exports are creating a cycle of excess that threatens to inflate subsidy costs and distort market signals. Unless market mechanisms — such as expanded OMSS sales, incentivised ethanol blending, or calibrated export releases — are intensified, the rice surplus could continue to mount.

The government’s immediate challenge is to align procurement with actual demand while containing fiscal pressures. A more balanced approach between public distribution commitments and commercial disposals will be key to stabilising India’s rice economy in the months ahead.