Ethanol rice abuse probe widens amid ₹1,000 crore fraud allegations; 4 acts

Four people have been arrested so far as an investigation into the alleged misuse of government-owned rice for ethanol production in Madhya Pradesh has spread to neighboring Maharashtra.

The Special Investigation Team (SIT) has so far arrested four people, including truck drivers, a transporter and a person associated with the ethanol plant, according to a report by The New Indian Express (TNIE). Around 20 trucks allegedly carrying diverted government rice were also seized, while nearly 40 people, including rice millers, transporters and ethanol plant workers, were questioned.

“Four persons have been arrested so far, including truck drivers, persons associated with the concerned ethanol plant and a transporter. At least 13 trucks have also been seized,” a police officer attached to the SIT told the publication.

Notice issued to six rice mills

Investigators have also issued notices to at least six rice mills in Balaghat and Seoni districts of Madhya Pradesh and Gondia in Maharashtra, the Times of India report said.

The probe stems from an FIR registered after the Food Corporation of India (FCI) reported that a consignment of subsidized rice sent from its Navegaon warehouse in Balaghat district to AVJ Agrico Pvt Ltd’s ethanol plant in Chhindwara was allegedly diverted and found at Sancheti Rice Mill in Waraseoni instead of reaching its intended destination.

According to TOI, Superintendent of Police Aditya Mishra said investigators are looking into allegations that around 1.4 lakh quintal of subsidized rice allocated for ethanol production was “recycled” through a cycle of purchase and custom milling before being supplied back to government agencies.

Police are comparing FCI dispatch records, GPS data, weighing records and rice mill records to reconstruct the movement of each shipment and identify the recipient of the alleged diversion.

How the alleged diversion came to light

The case first came to light on June 3 after a truck carrying 242.55 quintals of government rice meant for the Chhindwara ethanol plant was seized during a joint inspection by revenue and food department officials at Sancheti Rice Mill in Waraseoni area of Balaghat district. The consignment was loaded from the FCI warehouse at Navegaon but never reached the ethanol plant.

After the seizure, the district administration informed the Balaghat police, who registered an FIR and formed an SIT to investigate the alleged diversion. Four of the 13 accused named in the FIR have since been arrested.

Investigators believe the diverted rice was repackaged by millers and shipped back to government procurement agencies as freshly produced Custom Milled Rice (CMR) under existing milling contracts instead of being used for ethanol production.

The investigation also raised concerns that some of the diverted stock may have contained fortified rice fortified with essential vitamins and minerals and intended for distribution to children, pregnant women and adolescent girls as part of government nutrition programs.

What is the program of the Ethanol Blending Center

The alleged redirection may go far beyond the shipments detected so far. According to a TNIE report, it is worth up to 5 million tonnes of government rice ₹1,000 crore earmarked for ethanol production could have been diverted and channeled back into the supply system rather than being converted into ethanol.

Under the Ethanol Blending Center programme, surplus and fractional rice from FCI stocks are supplied to registered distillers through the Open Market Sale Scheme (OMSS) to support India’s target of 20% ethanol blending in petrol. Rice is sold at a subsidized price ₹2,320 per quintal, though its economic cost to FCI is in excess ₹4,000 per cent.

Meanwhile, in its internal investigation report, FCI claims that there was no violation of policy in the allocation of rice to the Chhindwara ethanol unit.