CAUSES OF FUEL ADULTERATION

4.0 CAUSES OF FUEL ADULTERATION

Financial incentives arising from differential taxes are generally the primary cause of fuel adulteration. In South Asia, gasoline carries a much higher tax than diesel, which in turn is taxed more than kerosene. Industrial solvents and recycled lubricants are other materials with little or no tax. Adulteration of gasoline & diesel is indulged primarily due to the significant price difference between these products and the adulterant. Various estimates have been made of the extent of financial loss to the national exchequer and the oil companies as a result of diversion of PDS kerosene, use of off-spec, low value hydrocarbons mixed with petrol/diesel, evasion of sales tax, etc.
There have been several independent studies conducted by private agency vis-à-vis the quality of petrol and diesel that gets dished out from the outlets to the ultimate consumer. A study by the Tata Consultancy Services concluded that more than 30% of Kerosene distribution intended for household consumption through PDS outlets flowed back to industry in one form or the other.

Most developing country governments have not yet established a monitoring regime and system of fines that can act as a strong deterrent to fuel adulteration. There are number of reasons for this, including poor governance, a lack of political will, lack of public awareness, weak regulatory agencies and a shortage or even absence of technical staff & equipment for designing and conducting monitoring. Given these limitations, identifying and dealing with this abuse will require addressing problems on multiple fronts.

The primary factors encouraging the practice of adulteration are the following:

» Existence of differential tax levels amongst the base fuels, intermediate products and byproducts. The adulterants being taxed lower than the base fuels give monetary benefits when mixed with replacing a proportion of the base fuels.

» Differential pricing mechanism of fuels and adulterants and easy availability of adulterants in the market.

» Lack of monitoring and consumers awareness.

» Lack of transparency and uncontrolled regulations in the production-supply & marketing chain for intermediates and byproducts of refineries.

» Non-availability of mechanism and instruments for spot-checking the quality of fuels.