It Can't Be This Crude

T.N.R. Rao, Former Petroleum Secretary
"The new petro kulaks are the legislators, they own two-thirds of all pumps."

No high-level inquiry will reveal anything because the adulteration racket generates thousands of crores of black money and involves those at the highest level of government. Two-thirds of all the petrol pumps and LPG dealerships are owned by legislators, either directly or through their friends and relatives. They are the new petro kulaks (landlords). Unlike the old days when there were a few pointsmen in every political party to collect funds, now every other politician takes bribes. Corrupt officials in the public sector oil companies who monitor the pumps buy protection from these ministers. Meanwhile, politicians get away with diversion of petroproducts. That Telgi found the adulteration racket the best investment opportunity for the money he made from the stamp paper scam is an illustration of the magnitude of the scandal.

Nobody has any pump-end statistics about the sale of petro-products. Whatever products are given to the dealers by oil companies is assumed to be the pump sales. We need to strictly monitor how much a pump sells to know how much adulteration happens. It behoves the petroleum ministry, which is in charge of policy-making, and the oil psus to enforce its rules more strictly. In fact, the diversion of return stream kerosene and naphtha from petrochemical and Linear Alkaline Benzene (LAB) plants is the oldest and the best example of non-enforcement of regulations. The government allowed some companies huge quantities of kerosene for extraction of paraffin and other products. A large measure of kerosene and naphtha after such extraction had to be returned to the psu refineries. But the government never enforced these licensing conditions. Now, of course, everything is free and the governance is lax.

Otherwise, how could the government allow local refineries to do private sales of kerosene in the open market? The government banned import of kerosene by claiming that imported kerosene is going into diesel adulteration. Now how does the decision to allow private sales solve the problem? Cheaper products will always go into adulteration.

"Corrupt oil officials buy protection... netas then ‘divert’ petro products."

Dipankar Mukherjee, CPI(M), Mmember, parliamentary committee on petroleum
"Whatever the problem, the name of one corporate house keeps cropping up."

There are two interesting aspects about the Outlook expose. Earlier, whenever petroleum adulteration was discussed by reform preachers in politics, bureaucracy and the media, attention was solely focused on the diversion of kerosene meant for the PDS into the petrol pumps. Even finance minister P.Chidambaram, in his mid-term review of the economy, referred to just this.But the real story about adulteration is the misuse of naphtha, benzene, toluene, imported kerosene and diversion of every source of fuel alternative for adulteration. In our corporate society, what is being dispensed is corporate justice. Nobody talks about diversion of naphtha or imported kerosene, because these are termed industrial fuels and then diverted. But everybody wants to increase the price of the poor man’s fuel, PDS kerosene, to avert adulteration!

The other is, whatever be the problems in the oil industry, the name of one corporate house keeps cropping up: whether it be the unfairly and unjustifiably high refining margins, sales tax evasion in Maharashtra, adulteration of fuels or huge duty drawbacks for their exports. The instance of the sale of Super ldo as a diesel alternative clearly bears out that the ministry had no control over the actions of this corporate house and it acts as a state within the state.

The disbanding of the anti-adulteration cell (AAC) on the plea of a couple of officers getting arrested for corruption is like suggesting the CBI should be wound up because it succumbs to political pressure. Our parliamentary standing committee had in its last two reports objected to the ministry’s decision to close down the AAC. There should be a high-level inquiry into the charges of adulteration by big corporate houses. Nobody wants an inspector raj, but nobody wants a corporate raj either.

"No one wants an inspector raj, but a corporate raj is bad too."

Arvind Kejriwal, Head, Parivartan, a citizens initiative
"Large-scale diversion of naphtha, kerosene is only with official connivance...."

There is a huge diversion of PDS kerosene. Parivartan had got the distribution records of a few kerosene oil depots in Delhi for June 2003 using the Right to Information Act. Field verifications of these records revealed 55 per cent diversion. It’s not easy to sell diverted PDS kerosene in the open market without detection because it’s coloured blue. Obviously, most of it finds its way to the petrol pumps to adulterate diesel.

The dealers get just Rs 70 per 1,000 litres as legal commission for selling kerosene. The average quota of a kerosene oil depot in Delhi is about 10,000 litres a month. This means that a kerosene dealer gets gross receipts of Rs 700 per month, out of which he has to do business and sustain a family. But if he sells 50 per cent of the PDS kerosene in the black market, he can make almost Rs 50,000 a month. Many of Delhi’s politicians run such kerosene outlets, directly or indirectly. The answer to the problem does not lie in reducing the gap in PDS and market prices. Kerosene is a poor man’s fuel. Cheap kerosene through PDS is critical for the survival of poor families since they use it for essentials like lighting and cooking. The answer lies in absolute transparency and accountability. When complaints of defalcation were made to the Delhi government about a year back, the administration, even after great cajoling, merely cancelled the license of kerosene depots. These are criminal offences and the guilty should have been prosecuted under the IPC, but the police and the government refused to register any cases.

Large-scale diversion of naphtha and kerosene can happen only with official connivance. Repeated complaints yield no results. On the contrary, evidence is destroyed or the complainant pressurised.

What should be done? The records of the kerosene outlets should be thrown open for public inspection. The Delhi government has agreed that they would make the records of all PDS outlets available for general public inspection every Saturday. This should be implemented nationwide. But this should be strengthened with accountability measures.If any discrepancy were reported to an official, he should be duty-bound to immediately cancel the shop within a few hours and register a criminal case. If the official does not do that, he should be penalised promptly and effectively.If any social audit reveals huge discrepancy, the officials of that area should be immediately placed under suspension and their role should be inquired into by an independent agency.

"The Delhi regime, even after many complaints, refused to register cases."

Dr T.S.R. Prasada Rao, Ex-director, Indian Institute of Petroleum
"It’s a huge menace, stiff deterrent penalties only way to stop adulteration."

The only way to curb this huge menace is to have a strict legal regulatory mechanism which means stiff penalties for those who adulterate petroleum products. The mechanism can be put in place by regular checking of samples at the petrol pumps. As far as I know, we have just one modern laboratory, in Noida near Delhi. We should have similar labs in every state. If any retailer is found to be adulterating the fuel he sells, there should be strict action against him. Only a deterrent penalty would stop the retailer from trying to make a fast buck by mixing diesel with kerosene or petrol with naphtha. Of course, there should be an all-India body to enforce such a strict legal regime which we unfortunately do not have now. Let the oil companies and the government sit together to formulate some such mechanism.

"There must be an all-India body to enforce a strict legal regime."