Adulterated fuel scams cost India $6.5bn a year
Mumbai - At a kiosk on the Trichy-Tanjore highway, one of southern India's main trucking routes, drivers line up to buy water bottles filled with green liquid. The bottles contain diesel or petrol diluted with paraffin, which kiosks sell for 10 percent less than petrol stations do. "My mileage gets hit, but it's cheap," says Kaja as he waits to fill his autorickshaw. Fuel adulterated with paraffin, which is subsidised to provide low-cost cooking fuel for the poor, is choking India's cities and costing the government $6.5 billion (R49 billion) a year in wasted subsidies and lost taxes, says Mysore-based consultant Bhamy Shenoy. The bill may soar as crude oil prices keep climbing. "The lost revenue ends up in the pockets of politicians, officials and gangsters," says Shenoy, who has worked for ConocoPhillips and advised the US Agency for International Development. "Adulteration is thriving because no one wants to lose this income." In the year to March, India spent $19 billion to subsidise fuel, including $4.8 billion on paraffin, the oil ministry said. Up to half the 9.4 million tons of paraffin India produces each year ends up in adulterated fuel, Shenoy says. Paraffin, which is not taxed, costs 9.05 rupees (R1.65) a litre in Mumbai. Motorists pay 36.08 rupees for diesel, including tax. The illegal fuel also undermines anti-air pollution efforts. Paraffin, or kerosene, made in India contains up to 2 000 parts per million (ppm) of sulphur, a major component of smog, exceeding the maximum 350 ppm mandated for diesel sold in major cities, according to Concert, a body that lobbies against fuel tampering. The scam works in various ways. Criminals usually pay staff of regional distribution centres to dilute the diesel and petrol, says Desikan, a trustee of Chennai-based Concert. In other cases, Shenoy says, tankers are diverted to secret depots where the fuel is mixed, then shipped to India's 34 000 official petrol stations, where most of the mixture is sold. Bharat Petroleum, India's second-biggest state refiner, fitted tamper-proof locks and satellite tracking devices to its 4 000 tankers, says Arun Singh, the deputy general manager for retail network planning. He would not discuss their effect or the extent of the problem. "Adulteration is rampant, and oil companies will have to be held responsible," says Anumita Roychowdhury of the New Delhi-based Centre for Science and Environment. She also blames government inaction. Oil companies deny corruption is endemic and say they are trying to curb racketeers. MS Srinivasan, the oil ministry's top civil servant, blames state governments. In 2006 the government ordered that a blue dye be put in paraffin so inspectors could see adulterated fuel. "It hasn't affected my supply," says one kiosk owner. "Everyone is paid to stay quiet."
