The Grease Guzzlers

Until a few years ago, management trainees picking up appointment letters from state-owned oil companies were reminded of an in-house industry dictum: life is never short of cash up to the level of an assistant manager. The rackets which covertly-and at times overtly-flourished at almost all regional centres of the oil giants have now taken the shape of a Rs 1,500-crore high-speed diesel (HSD) scam. And, according to sources in the CBI which has cracked the nation-wide officer-dealer-retailer network, this figure may be only half the iceberg.

Last month, when the CBI raided more than 300 oil depots and residences of junior officers of three public sector oil majors in the northern and western regions, their catch was devastating. Almost each officer had lakhs of rupees stashed under their pillows and amassed wealth highly disproportionate to their known sources of income. "This is a major racket and raids are still continuing across the country. The officers pilfered oil, tampered with documents and did almost anything and everything they wanted. It seems there was no system at all," a senior CBI official told Outlook. The official, who requested anonymity, said the Indian Oil Corporation (IOC) had the lion’s share (around 80 per cent) in the scandal while the remaining 20 per cent could be split between companies like Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL).

What was the modus operandi of the nexus? Central Sales Tax (CST) is levied on inter-state sales of HSD and local sales tax is charged if transaction occurs within the state. The government lowers sales tax on HSD quota if oil companies claim that the product will be used for manufacturing goods to be sold within the state. To avail of this benefit, officers of these oil companies were selling hundreds of thousands of litres of HSD to fictitious companies and industrial units whose records were absent from the list maintained by the sales tax departments of the respective states. These were Gujarat, Punjab, Madhya Pradesh, Uttar Pradesh and Maharashtra. The CBI also found that companies which had downed shutters more than five years ago were still being supplied the fuel. And this was being done through a neatly-operated nexus of psu officials and tanker-owners.

Expectedly, the scam has shaken up the ministry. Petroleum secretary S. Narayanan convened an emergency meeting of marketing directors of all public sector oil companies and reportedly told them to resign if they couldn’t handle the problem. Officials in the ministry feel once the verification process is over, the scam could turn out to be worth over Rs 2,500 crore.

Sources say the ministry is doubly upset because it has come to know that oil companies have been supplying diesel to those whose allocation had not been approved and that the ministry had written to them to stop the practice. "This was never followed. The second surprise factor is that how could the oil companies fail to detect the obvious fact that their very own retailers (read petrol pumps) were getting supplies from sources other than the company. This means oil was being pilfered," they add.

A preliminary investigation report prepared by the CBI and submitted to the ministry shows that officers in as many as 11 states are involved in the racket. Already, a large number of the 300 officers questioned have been shifted to non-sensitive posts by the oil companies. The report also cites several such recent instances in Punjab and Haryana where oil was regularly pilfered from tankers with active connivance of the drivers and junior officers of the oil companies.

Says IOC director Subir Raha: "We are taking appropriate steps. But this is not an oil industry scam. We feel it’s a failure on the part of the licensing and sales tax officials which caused such diversion of diesel and other petroleum products. It’s only in some isolated cases where oil companies were found guilty of not conducting periodical checks. Instead of pointing fingers at us, the CBI needs to look at the other side of the fence. Why let go the sales tax officials of the states concerned?"

The officers affected too are up in arms. The Oil Sector Officers’ Association (OSOA) has written to petroleum minister Ram Naik protesting the recent CBI move to arrest a large number of its members in the HSD scam. The association, which represents 45,000 officers in public sector oil companies, demanded the minister immediately convene a meeting and discuss the issue. It also claimed that the scam involved corrupt factory owners and not officers. But Naik is not ready to buy their obviously weak defence. The raids are expected to continue. So will sleepless nights for those officers who were blinded by the lustre of black gold.