US Raises New Queries on India's Grain Biofuel Programme
The United States has sought fresh details from India regarding the utilization of government-held rice stocks for ethanol production. This move brings India's expanding grain-based biofuel initiative back under scrutiny at the World Trade Organization (WTO). According to a report by the Economic Times on September 16, Washington has specifically asked how India is complying with the WTO's 2013 Bali Ministerial Decision on public stockholding while continuing to procure rice at administered prices and releasing a portion of these stocks for non-food uses, including ethanol.
The US delegation has also requested a detailed breakdown of central and state government expenditures related to public stockholding, foodgrain distribution, and sales to industrial users such as ethanol manufacturers. These queries are expected to be formally addressed at the WTO Committee on Agriculture meeting scheduled for September 24-25.
Policy Intersection: Food Security and Energy Goals
The dispute highlights the intersection of two major Indian policies: the government's procurement of rice for food security and the national push to blend ethanol into petrol. India procures paddy at minimum support prices (MSP) and maintains rice stocks in the Central Pool to meet requirements under the National Food Security Act (NFSA) and other welfare schemes. Surplus stocks are often released under the Open Market Sale Scheme (OMSS).
In August 2024, the Department of Food and Public Distribution (DFPD) allowed ethanol distilleries to participate in Food Corporation of India (FCI) rice auctions again. Initially, this permitted distilleries with ethanol allocations from oil marketing companies to lift up to 23 lakh metric tonnes (LMT) of rice between August and October 2024. The programme was subsequently expanded; in February 2025, the government allowed ethanol distilleries to purchase up to 24 LMT of FCI rice at a fixed price of Rs 2,250 per quintal under the OMSS.
By August 2025, the Petroleum Ministry stated that the government had approved 52 LMT of surplus FCI rice for ethanol production for Ethanol Supply Year (ESY) 2024-25 and an additional 52 LMT for ESY 2025-26, valid until June 30, 2026.
Data on Rice Stocks and Ethanol Share
The role of FCI rice in ethanol production has grown significantly. The Petroleum Ministry reported in July 2026 that FCI rice accounted for 24.64 percent of ethanol production in ESY 2025-26, compared to just 0.02 percent in 2023-24.
India maintains substantial rice stocks well above prescribed buffer norms. As of May 28, 2026, rice stocks in the Central Pool stood at 397 LMT, significantly higher than the July 1 buffer norm of 135.40 LMT, according to the Department of Food and Public Distribution. Additionally, around 298 LMT of procured paddy was awaiting milling and addition to rice stocks at that time.
The Indian government maintains that ethanol production does not take precedence over food distribution. In a statement on July 31, the Petroleum Ministry clarified that FCI rice is approved for ethanol only after requirements under the Public Distribution System, the NFSA, welfare schemes, and mandatory buffer stocks have been fully met. This policy operates alongside India's broader ethanol programme, where the government advanced its target of blending 20 percent ethanol into petrol from 2030 to ESY 2025-26. Average blending reached 20 percent during the period from November 2025 to June 2026.
WTO Context and Previous Challenges
The current dispute is rooted in WTO rules governing agricultural support. Under the WTO Agreement on Agriculture, developing countries generally have a *de minimis* threshold allowing product-specific support of up to 10% of the value of production before it counts towards limits on trade-distorting domestic support. India's rice support has exceeded this threshold. In its 2024-25 notification to the WTO, India stated it had exceeded the *de minimis* limit for rice and invoked the protection available under the 2013 Bali Ministerial Decision on public stockholding for food-security purposes.
The Bali mechanism, often referred to as the 'peace clause,' protects qualifying public stockholding programmes of developing countries from certain WTO dispute-settlement challenges when subsidy limits are breached, provided specific conditions are met. A 2014 WTO decision extended this mechanism until members agree on a permanent solution. Key conditions include ensuring that stocks procured under such programmes do not distort trade or adversely affect the food security of other WTO members, along with meeting notification and transparency requirements.
This is not the first time India's rice support has been examined. At the Committee on Agriculture meeting on May 27-28, the US, Australia, Paraguay, and Ukraine submitted a counter-notification challenging India's calculations of market price support for rice and wheat. They argued that the support was higher than notified and was affecting global markets. India rejected these calculations, stating that the underlying data were disputed and that its policies were necessary for food security and consistent with WTO rules.
Prior to that meeting, the US had also questioned the use of public rice stocks for ethanol. The Third World Network reported that Washington pointed to FCI data showing that roughly 11-14% of rice released from public stocks in January, February, and March 2026 had gone towards ethanol production. The US asked how this usage squared with India's food-security justification for its stockholding programme.
The latest US questions extend this existing debate. The core issue before the committee is not whether India is prohibited from producing ethanol from rice, as the Bali decision does not contain a specific ban on ethanol use. Rather, the questions concern whether India's operation of its public stockholding and price-support system continues to meet the conditions attached to the WTO protection it invokes when rice support exceeds the prescribed limit.