Counterfeiting or diversion of products in the oil and gas sector controlled by government is causing grievous hurt. Retail outlets of gas stations are the places where they are adulterated with diesel to make a killing in the market. And there is a mafia operating this diversion trade, which may be taking roots to even powerful politicians in the eastern part of the country.

Government took steps to put an end to this menace by taking the help of international consultants and corporates such as the US-based Authentix last year. Authentix is a pioneer in checking adulteration and brand protection and is owned by the world-renowned private equity group Carlyle ad some others.

This led to the introduction of the highly innovative ‘marker’ system, launched by the UPA government to check the Rs 5000 crore worth diversion of PDS Kerosene for auto fuel adulteration. But after a successful stint since October it was unfortunately given a silent burial on 31 December last year.

Colouring kerosene - Markers system

The ‘marker system’ was actually introduced by the government after a public outcry against the brutal killing of Shanmugham Manjunath, the Lucknow-based Indian Oil Corporation official. The oil adulteration mafia eliminated him after he blew the whistle by conducting a raid at a petrol pump in Lakhimpur Kheri that was selling adulterated fuel. This November 2005 episode shook the nation’s conscience and highlighted the menace of the oil mafia.

The scheme, launched in October 2006 with much fanfare and a publicity blitzkrieg on the government’s Aam Aadmi plank, paved the way for introduction of a permanent marker in kerosene on an all India basis, which was carried out by oil marketing companies (OMCs) at their terminals and depots. When this marker-blended kerosene is used for adulterating auto fuels - diesel or petrol - it can be detected easily through a visual test procedure using a special testing kit. A new technological intervention in India, it helped in detecting even small traces of kerosene in auto fuels.

A study by the National Council of Applied Economic Research sponsored by the Petroleum Planning and Analysis Cell of the Ministry of Petroleum and Natural Gas found that 38.6 per cent of the sale of PDS kerosene meant for the poor was being diverted among other things to adulteration of transport fuels. It also found that the maximum diversion (more than 30 per cent) was taking place in Chandigarh, Punjab, Gujarat, Jharkhand and Uttarakhand while it was more than 20 per cent in Andhra Pradesh, Assam and Karnataka. Of the total kerosene sale of 11.4 million kilolitres, a whopping 4.4 million kilolitres were illegally diverted.

A third of PDS kerosene diverted

According to Petroleum Ministry sources, the technology used for the marker programme enabled even very low levels of adulteration to be detected and this resulted in a significant increase in identifying the adulterators. Over the past two years of the programme, more than 800 sites have been identified with adulterated fuel and are under investigation. Some of these sites were found to have received the adulterated fuel from tanker trucks. To date, over 100 sites have been terminated by the OMCs and all tankers found to have been carrying adulterated fuel have been blacklisted.

The dealers are ‘on alert’ and aware that they can now be caught and punished for adulterating fuel. For every site that is caught, probably ten times that number has stopped adulterating.

But the scheme has come to a sad end. The government’s decision to wind it up came as a rude shock to many, including some NGOs, who have been fighting a pitched battle against the oil mafia. In fact, the Petroleum Ministry had assured the Mumbai High Court only in September 2008 that it would complete the tendering process for continuation of marker system on permanent basis, by 31 December 2008.

Also, in April 2008, in its 20th report presented to Lok Sabha, the Standing Committee on Petroleum and Natural Gas stated that the marker system ‘heralded the introduction of world-class technology to curb and eventually eliminate the menace of adulteration of transportation fuels along the supply chain.’ With the marker’s presence, adulteration even with very low levels of kerosene can be detected.

Besides amending the MS/HSD Control Order 2005, SKO Control Order, 1993 and MDG 2005 providing for introduction of the marker system, the government had set up a committee to monitor the progress of the ‘marker’ system and even asked OMCs in the private sector to introduce ‘marker’ in kerosene, much as public sector OMCs had done.

In response to public interest litigation against the marker system, which was subsequently dismissed in September by the Mumbai High Court, the OMCs had submitted, “the detection of adulteration has in turn resulted in an increase in the sale of high speed diesel inter-alia indicating that diversion of kerosene has been reduced.”

Some critics have raised questions on the efficacy of the ‘Marker’ scheme but the programmers effectiveness can be assessed by the fact that despite increased audits, the sites identified carrying adulterated fuel have significantly come down with the catch rate falling from 40-60 sites per month to 15-20 now, oil industry sources said.

Atul Gupta, managing director, Authentix India (wholly owned subsidiary of the US group), says sudden disruption of the marker system could derail a scheme, which was successfully implemented. And the election process will further delay reintroduction of the scheme - a time gap the oil companies cannot afford. The scheme needs to come back on rails soonest, the choice is of course the government’s, on how it wants to reintroduce the scheme. But we are ready to help the authorities concerned in checking this menace to society, he said.

For election funding?

Shama Khan, President of Sahara Kalyan Samiti, an NGO carrying out social activities in the resettlement colonies, says the government’s decision, even if temporary, will open the floodgates for adulteration of PDS kerosene. “At least we have observed definite improvement in the availability of PDS kerosene after the introduction of the marker system,” she said.

Ministry sources claimed that some sections of the dealers and transporters, indulging in malpractices such as black marketing and diversion of petroleum products, who have been badly hit by the marker system, were lobbying hard to get the order amended permanently or at least make a fast buck while the process for a fresh tender is on. Intelligence reports indicate that the petroleum ministry has received few tenders and not all of them have technically qualified for the bids that will seek to reintroduce the scheme.

And now with the elections being announced, the marker system tender goes for a mighty toss as the issue of adulteration of diesel with kerosene itself takes a backburner as the government will now suffer from the inability to take decisions - and this decision on kerosene, a mass consumption fuel, can never be taken until a new government is in place.

This is the time the adulterators will make hay while the sun shines. That is make money unchecked while kerosene bleeds from the system into the mafia storage bins. The country’s lifeline transportation system, using diesel, will suffer from want of fuel. And the adulterated fuel in supply chain will damage their automobiles besides causing pollution. This is a priority agenda for the new government when it assumes power in June this year.