Food Corporation of India (FCI) on Monday said its investigation into the alleged diversion of subsidized rice meant for ethanol production in Madhya Pradesh was limited to 242.50 quintals, valued at around 242.50 quintals. $5.63 lakh.
The central government agency rejected reports claiming the value of 5 lakh tons of rice $News agency PTI reported that Rs 1,160 crore was illegally transferred in the state, calling it “not only factually incorrect but also completely baseless”.
The company said $The Rs 1,160-crore figure refers to the total value of rice legally supplied to distilleries under the ethanol blending program and cannot be treated as the value of the alleged diversion.
Supply of rice under the ethanol programme
FCI has supplied 2.98 lakh tonnes of rice to Madhya Pradesh distilleries during the ethanol supply year 2024-25 in $22.50 per kilogram.
During the supply year 2025-26, up to June 30, 2026, FCI issued another 2.41 lakh tonnes at $23.20 per kg, taking the total supply to around 5.39 lakh tonnes, according to PTI.
FCI said the government’s monitoring systems detected irregularities in the movement of rice in the first week of June 2026. The MP Food Department registered the FIR on June 5, and a joint team of FCI and the Ministry of Food and Public Distribution inspected the site on June 11.
The company withheld the security deposit of the distillery in question and stopped further allocation of rice. The MP’s government formed a special investigation committee, while the state Civil Supplies Authority blacklisted the rice mill and imposed a fine. $44.12 thousand penalties.
The MP probe expands
What started as an examination of a suspicious truck turned into a full-scale investigation. Authorities are now tracking 17 seized trucks, 56 rice mills and 22 ethanol plants, as well as testimonies from more than 50 witnesses, according to NDTV.
The investigation began after police seized a truck carrying government rice to an ethanol plant parked inside a private mill instead. Now, investigators want to know whether factories actually converted this subsidized rice into fuel, or whether they secretly passed it through private mills to return it to government warehouses.
The report said police were uncovering a “circular trading” ring. In this scheme, ethanol plants allegedly sold their cheap government rice to private mills to make a quick profit. The millers then repackaged the grain and returned it to the government as “newly processed” rice.
To uncover the case, the police interrogated the owners of 56 rice mills, collected their business records, and confiscated 17 suspicious trucks.
Investigators are now matching government dispatch records, warehouse receipts and transportation records to actual ethanol production numbers. They check electricity bills, machine run times, and labor records at both distilleries and mills to see if their actual production matches the mountain of cedar they claimed to be processing.
