"Factually Incorrect": Food Corporation Disputes Rice-Ethanol 'Scam' Scale

The Food Corporation of India (FCI) has branded reports alleging a massive rice diversion scam in Madhya Pradesh as "factually incorrect and completely baseless". Disputing the scale of alleged misappropriation of the grains earmarked for ethanol production, it said the value of the missing rice under probe is just Rs 5.63 lakh, not the entire stock worth Rs 1,160 crore.

A truck carrying rice from the FCI warehouse to the ethanol plant was found inside a private rice mill, prompting a wider probe involving 17 seized trucks, 56 rice mills, and 22 ethanol plants. Investigators were trying to establish how much of the nearly 5 lakh metric tonnes of government rice allocated for ethanol production was actually converted into ethanol.

"Certain media reports have alleged large-scale diversion of Food Corporation of India (FCI) rice supplied for ethanol production in Madhya Pradesh, suggesting that around 5 lakh metric tonnes (LMT) of rice worth approximately Rs 1,160 crore was diverted and misappropriated. The reports are not only factually incorrect but also completely baseless," the central government body that handles grains wrote in a statement on X.

It said a total of 5.39 LMT rice had been issued to distilleries since 2024-25.

"The cost of Rs 1,160 crore mentioned in the report has been calculated based on the issue price of 5 LMT rice at the rate of Rs. 23.20/kg (5,00,000,000 kg* Rs. 23.20/kg = Rs. 1160 crore) on an assumption that the entire quantity of 5 LMT is misappropriated. This figure is the actual amount paid by distilleries to FCI for lifting of 5 LMT rice," it said.

"The investigation presently underway is not related to the entire quantity of rice supplied under the ethanol blending programme. It pertains to an alleged diversion of 490 bags (242.50 quintals) of rice involving an estimated value of about Rs 5.63 lakh. Therefore, the media reports equating the entire value of rice supplied under the ethanol blending programme with the alleged diversion are misleading. The figure of Rs 1,160 crore merely represents the value of rice legitimately issued by FCI against payment received from the concerned distilleries in Madhya Pradesh and cannot be construed as the value of the alleged diversion," it clarified.

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— Food Corporation of India (@FCI_India) July 13, 2026

Also read: Rs 1,160 Crore Rice 'Scam' Widens: 56 Mills, 22 Ethanol Plants Under Scanner

FCI listed the action taken, noting that the government itself had detected it.

"It is also pertinent to note that the matter was detected by the Government agencies themselves, and prompt action was initiated well before publication of the media reports," it said.

"Following detection of irregularities in the movement of rice consignments during the first week of June 2026, FCI immediately issued notices to the concerned distillery, and the State Food Department registered an FIR on 5 June 2026," it added.

The body said the Madhya Pradesh government has constituted a Special Investigation Team (SIT) to probe the alleged scam, and the concerned rice mill has been asked to pay a penalty of Rs 44.12 lakh and is blacklisted.

It said that the government's own monitoring mechanism had detected the misappropriation, and it had already initiated action.

"The matter continues to be under investigation, and appropriate action will be taken against all persons found responsible in accordance with the law," it added.

The Alleged Scam

The First Information Report (FIR), confidential reports sent by the Balaghat Collector and records examined by police indicate that subsidised rice was sold to private rice mills.

The stock had been supplied to ethanol plants at about Rs 2,320 per quintal to boost fuel production. The same plant operators or their representatives allegedly sold this rice to millers at between Rs 2,600 and 3,000 per quintal, earning a margin without producing ethanol.

22 ethanol plants across 17 districts received government rice under the same subsidised scheme. Investigators are trying to determine which plants actually produced ethanol and whether any portion of the rice was diverted to mills.

What The Police Said

"We initially received information that three trucks carrying rice had left FCI warehouses in Balaghat for the AVJ Agrico ethanol plant. We then learnt that one of the trucks had been taken to the local Sancheti Rice Mill. A joint team of Revenue, Food and Police officers was formed, and during the inspection, the truck was found inside the rice mill. We registered an FIR for cheating and constituted a Special Investigation Team of 20 to 25 members under a gazetted officer,"  Balaghat Superintendent of Police Aditya Mishra had told NDTV.

"We examined the records, particularly those seized from AVJ Agrico, to verify how much rice left the warehouses for the ethanol plant, when it moved and at what time it reached the plant. We also analysed data obtained from the owners of the warehousing company and their software. More than 50 statements have been recorded so far. Four people have been arrested, more than 13 accused have been identified, and the investigation is continuing. Further action will be taken as new facts emerge," the police officer added.