Article by Prof Ashok Gulati on cost of being world’s largest rice producer and exporter:
Production, Buffer Stocks, and the Ethanol Shift:
➡️India produced 154 million metric tonnes (MMT) of rice in 2025-26, becoming the world's largest producer. It is also the top exporter, accounting for roughly 40% of the global rice trade.
➡️Food Corporation of India (FCI) stocks hit five times the buffer norm
➡️To reduce stocks, nearly 5 MMT of rice was diverted for ethanol production in FY26.
Three Policy Distortions:
➡️Open-Ended Procurement & State Bonuses: While the central MSP for paddy is Rs 2,369/quintal (2025-26), states give competitive bonuses (e.g., Chhattisgarh pays ~40% above MSP; Telangana pays ~20% above), causing overflowing stocks.
➡️Subsidized/Free Power: Rice requires up to 25 irrigations per season. Free power acts as an incentive for unrestricted groundwater mining.
➡️Highly Subsidized Urea: The retail price of urea has been frozen at Rs 242 per 45-kg bag, with the government absorbing 85-90% of the cost.
Severe Environmental and Health Hazards:
➡️Water Depletion: Producing 1 kg of rice requires an average of 4,000 litres of irrigation water.
➡️High GHG Emissions: Traditional transplantation emits heavy amounts of methane (25 times more potent than CO2) and High fertilizer use releases nitrous oxide
➡️Health Crises: Only 35-40% of applied nitrogen is absorbed by plants; the rest leaches into groundwater as nitrates, which is linked to blue baby syndrome, thyroid issues, diabetes, and increased cancer risks.
Key Policy Recommendations:
➡️Procurement Caps: Limit government procurement in all states to not more than 40% of their total production and ban state-level MSP bonuses.
➡️Feedstock Rationalization: Stop mandating ethanol plants to source a fixed share of feedstock from FCI rice; promote maize as a more sustainable alternative.
➡️PDS Rationalization: Restrict free PDS supplies strictly to the most vulnerable (Antyodaya) population, and charge remaining beneficiaries at least half of the MSP.
➡️Sustainable Agriculture: Actively promote Direct-Seeded Rice (DSR) to conserve water.
➡️Subsidy Reform: Shift from price-distorting fertilizer subsidies to direct income support to farmers, alongside decontrolling fertilizer prices.
Article link https://indianexpress.com/article/opinion/columns/rice-to-ethanol-policy-is-deepening-economic-and-environmental-stress-10772961/