Crushing petroleum products adulteration through fuel marking

The practice of adulteration is nothing new and unscrupulous elements indulge in it without any fear of the legal implications. There is almost no industry that is spared in this regard. Adulteration is rampant in food items, petroleum products , paints, etc. It goes unchecked as law enforcers are unable to check the practice. The Punjab Food Authority has been active in this respect. However, a lot is desired before it can be brought under control.

Adulteration in petroleum products is one area that has been giving a lot of trouble to the consumers and the government alike. Unscrupulous elements have been mixing kerosene oil with petrol and high-octane blending component (HOBC) to mint money and fleece the unsuspecting consumers. Kerosene is generally a tax-free product compared to almost 40-50 percent taxes on other petroleum products such as petrol, high speed diesel (HSD) and HOBC. Since there is a price differential of about Rs. 30 between petrol and other petroleum products compared to kerosene, dishonest operators mix kerosene with petrol for higher profits. Mixing of kerosene with petrol and HOBC has been a serious issue, causing serious revenue loss to the government and illegitimate earnings for the unscrupulous market elements at the cost of consumers. This loss of revenue for the government is often compensated by an increase of tax, putting a higher burden on law-abiding businesses and consumers.

It has been argued that a Rs. 30 price differential is encouraging dishonest market operators to mix kerosene with petrol for higher profits. This resulted in sale of adulterated and poor quality petrol in the market as high grade petrol (RON92).

According to estimates, HSD sales across the country are over 800,000 tonnes per month compared to around 600,000 tonnes per month of petrol. The sale of kerosene, on the other hand is less than 10,000 tonnes per month. As such, the adulteration of kerosene with higher priced petroleum products deprives the government of revenue while motorists are also cheated as the adulterated fuels increase fuel consumption and damage the engines.

The petroleum ministry has been trying to convince the government to introduce fuel marking products to curb the menace of adulteration and as a first step is planning to introduce ‘fuel marker’ in locally produced kerosene.

The plan, however, has hit snags. A number of news reports have appeared in the media of late regarding alleged irregularities in implementing the fuel marking programme.

In this regard a news item appeared in a leading publication which stated that the government has decided to launch a fuel marking programme in an effort to curb the mixing of cheap kerosene oil with high-speed diesel. At present, Pakistani refineries are producing kerosene oil without adding any dye, which makes it difficult to detect its mixing with high-speed diesel.

A technical committee, headed by the Oil Companies Advisory Council (OCAC) and comprising representatives of OGRA, the refineries and the HDIP, has been constituted to implement the fuel marking program. The authority has completed the bidding process and Authentix of the UK has been declared the successful bidder. The cost of fuel marking has been quoted up to Rs. 1.22 per liter of oil for six months.

However, the Oil and Gas Regulatory Authority (OGRA) has suggested that bids for implementing the fuel marking programme should be re-invited from a larger forum in order to ensure a more competitive process and create transparency.

Coming up with its comments on the proposed plan, OGRA has said that the regulator was bound to follow rules of the Public Procurement Regulatory Authority (PPRA). Therefore, prior to the inclusion of the fuel marking cost in the kerosene oil price, the OCAC – which represents oil marketing companies – must adopt the bidding process prescribed under the PPRA rules.

It is in this background that Transparency International (TI), Pakistan – a civil society organization dedicated to curbing both international and national corruption – has written a letter to the chairman of OGRA on the subject. (A copy of the letter is available on the OGRA website).

The letter, written by the TI chairman, has highlighted a complaint it has received against OGRA for the procurement of the Fuel Marking Award Contract to minimize oil adulteration .

It mentions that it has received a complaint against Oil and Gas Regulatory Authority (OGRA) for procurement of fuel marking award contract to minimize oil adulteration . The complaint has alleged the following:

1. The tender notice was not floated in any national newspaper

2. The whole process was managed by OCAC

3. OCAC identified 6 companies who were given the prequalification of EOI

4. A third party consultant was hired to develop ITB

5. Only 2 companies responded to ITB

6. The final bid was only submitted by one firm

7. The contract of the fuel marking award has been awarded without a proper tender process.

The letter also mentioned that the Hydro Carbon Institute of Pakistan “… was not consulted or taken onboard at any stage of the bidding process, against the stipulation in the minutes and its first involvement began with the opening of single technical bid on June 2, 2017.”

TI has observed that there has been violation of PPRA Rules 2004, Rule 12 (2) for not advertising the tender notice and Rule NO. 23 (1) for not providing the bidding document.

It has also been pointed out that the National Accountability Bureau (NAB) has also directed that all procuring agencies should make available the bidding or prequalification documents and other related communication in downloaded format, for any interested bidder or party, at their website to use these documents for submitting bid(s) with admissible tender fee, if liable for cognizance by NAB under relevant section of NAO 1999.

Recognizing the letter from TI, OGRA has suggested that bids for implementing a fuel marking programme should be re-invited from a larger forum in order to ensure a fair competitive process.

OGRA has suggested that since only one company prequalified for the bidding, it may be prudent to re-advertise on a larger forum to select in a fair competitive process.

In the interest of protection of consumer rights, the unscrupulous activities being indulged in by certain unfriendly elements must be immediately looked into by all relevant authorities.

NIPCO House, 4 Shaarey Fatima Jinnah,

LAHORE (Pakistan)

Tel : 092-42-6367580

Fax : 092-42-6367005