Tuesday Sep 16, 2014
| Text Size
[-]
[+]
Search IPPmedia

How fuel-marking scheme contributes to national income

17th April 2012
Print
Comments

By the time when the Energy and Water Utilities Regulatory Authority (EWURA) started to regulate the petroleum sub-sector business in Tanzania 2006, fuel adulteration had reached alarming levels in the country. Vehicles were spewing out heavily polluting toxic materials as a matter of course, the result of using poor-quality fuel.

Not only that... It is estimated that fuel adulteration was also denying the Government tax revenues to the tune of about 300bn/- a year.

In concerted efforts to tackle the problem, EWURA came out with an innovative fuel-marking programme code-named 'DNA.' Implementation of that programme has, in due course of time and events, made it possible for the government to increase public revenue collections on the one hand, and raise the quality of fuel on the other.

To that end, EWURA entered into a contract with Global Fluids International (T) Ltd (GFI), under which the company brought X-ray Fluorescence (XRF) machines into the country with which to implement the XRF programme, started in earnest on September 1, 2010.

In the event, statistics show that the percentage of fuels that have been caught in the tax net as a result of the programme has increased as follows:-

Petroleum: on a monthly average, tax was being collected on 34,589,906 litres of fuel before the programme was started. This increased by 9,422,454 litres  rising to 44,010,360 litres: a 27 per cent increase  within a single month of implementation of the programme!

Statistics also show that, after the start of the programme, government revenue collections during that single month increased by 5,078,702,706/- (i.e.539/- per litre times 9,422,454 litres). On average, this is the equivalent of a 60, 944,432,472/- increase in government tax revenues a year!

Diesel: before the programme was started, tax was being paid on 69, 221,971.73 litres of diesel a month. Following the launching of the programme, monthly taxable diesel rose by 17,843,838 litres, reaching 87, 065,810 litres... An increase of 26 per cent.

The 'extra' tax paid on the increased diesel sales in that single month amounted to 9, 171, 732,732/-, calculated at 514 per litre times 17,843,838 litres. On an annual basis, this works out at 110, 061,000,000/-!

Kerosene: statistics show that tax was being collected on 30,025,977.11 litres a month prior to implementation of the programme.

However, this actually FELL to 19,005,580 litres  a drop of 11,020,397 litres per month, or 37 per cent!

An explanation for this sudden drop lies in the fact that imports of kerosene which was being used in adulterating diesel for mega-profits by unscrupulous traders  fell after the tax on the item was brought to more-or-less the tax level for diesel! In the event, this removed the motive/incentive for fuel adulteration!

Based on the above, and following the continuance field inspection exercises performed by EWURA on Regular basis, a 50% increase in the total volume of taxable fuel designated to the local market was recorded, which is translated to Hundreds of Billions of Shillings in Collectable revenue.

Implementation of XRF programme

The programme was introduced in Tanzania effectively September 1st 2010 to control the fuel business involving especially petrol, diesel and kerosene.

The programme, which is applied to the fuel soon after it has been loaded on transport trucks at designated depots in the country, is designed to help curb problems that had characterised the petroleum sub-sector for years.

Fuel adulteration  usually using kerosene to 'doctor' diesel or petrol in some cases — made it possible for unscrupulous traders to garner unduly huge profits at a time when kerosene was relatively dirt-cheap as a result of low tax rates.

The practice invariably causes health and environmental hazards; tax evasion; car and plant breaks-down; unfair business competition...

The problems were not confined within Tanzania; they extended beyond the borders and to neighbouring countries which imported fuel in transit through Tanzania.

The programme is also proving effective at controlling product smuggling, whereby untaxed fuel consignments are brought into the country usually via cross-border routes and entry points which are not officially-designated for the purpose.

Such consignments could conceivably also be of fuel adulterated outside Tanzania!

The XRF programme also works well with fuel products destined for neighbouring countries . It not only effectively counters the dumping on the domestic market of untaxed fuel products in transit through the country, but also ensures that such consignments arrive unadulterated at the destination countries. These include Rwanda, Burundi, eastern DRC, Malawi and Zambia.

Under the programme, EWURA conducts inspections at fuel stations an fuel transporting trucks in the country, using special devices known in labs as X-ray Fluorescence Machines that fitted on special EWURA trucks.

The computerised information so garnered is of the state-of-the-art technology. It instantly gives the results sought for, and which are tamper-proof and can be safely stored for future use over a long period of time.

In all fairness, the Authority offered a four-month grace period to service providers to finish up their stocks which had not been subjected to the XRF programme before it was started by taking fuel samples at fuel stations.

The fuel sample-taking exercise officially started in February 2011, and ended in April 2011. In the event, 235 petrol stations in 12 regions of Tanzania were inspected and had their fuel samples drawn.

During the exercise, about 54 fuel stations were found to indulge in fuel adulteration, which is equivalent to 23 per cent of all the fuel stations so inspected!

Again, 22 oil trucks were intercepted for on-the-spot inspection along the Dar-Morogoro Highway, and at the Tanzania/Rwanda and Tanzania/Burundi borders. The samples taken from three of the trucks  which is equivalent to 14 per cent of the trucks inspected  were found to be carrying adulterated fuel!

In that regard, those who were found guilty were punished according to the law  and, where it was discovered that tax was evaded, the requisite information was forwarded to the Tanzania Revenue Authority (TRA) for appropriate action, including recovery of the evaded tax!

In general, application of the XRF programme and fuel inspection exercise is continuing to operate smoothly. This immense success has largely been contributed to by effective cooperation between EWURA and the Tanzania Oil Marketing Companies (TOAMAC) in the country.

The two formed a five-person Committee that makes regular follows-up on implementation of the programme, and meets once a week for progress evaluations and tackling emerging problems.

Members of the Committee include those drawn from EWURA (one representative); GFI (one representative); and TAOMAC (one representative).

The success of the programme is also partly attributed to the fact that the fuel inspection exercise is carried out openly with full involvement of fuel dealers as a matter of course. Studies at fuel stations along Dar-Morogoro Highway

Due to the ever-increasing numbers of fuel stations which sprout along the Dar es Salaam-Morogoro Highway, EWURA is well-aware that there are unscrupulous fuel dealers engaged in fuel adulteration in different places, including private yards, fuel stations, fuel reservoirs — and even fuel transport trucks!

In that regard, EWURA has not been resting on its laurels. For example, the Authority, working in collaboration with the Kibaha Town Council, destroyed several 'backyard' fuel adulteration points along the Highway under the latter's jurisdiction.

EWURA also continues to conduct strenuous inspections of fuel trucks and stations to ensure that the adulteration malpractice is brought to an end.

Again, the Authority is closely making follows-up on congested fuel stations situated along Dar-Morogoro Highway, and those situated along the Mbagala-Mkuranga Road.

The objective is to establish monthly fuel sales figures for every fuel station; identifying fuel stations that sprung up after EWURA's information; identifying distances from one fuel station to another; and satisfying itself that the fuel stations were constructed in accordance with the laws governing the petroleum downstream market

The challenges

Indeed, EWURA faces several major challenges, which it regards as opportunities to strive and do better.

For instance, the Authority aims at conducting regular inspections at all fuel stations in the country, and checking up on as many oil trucks and border-crossing points as possible as a matter of course —always working in close cooperation and collaboration with TRA.

The other challenge facing the Authority is that of cheating, including the (illegal) use of fuel filling devices such as dipsticks which don't tell the full story, and fuel trucks which don't always show the exact volumes of fuel they are carrying!

Expectations

EWURA has vowed to maintain its good system of cooperating with various stakeholders, including all fuel dealers, and exchanging important information about the implementation of its programmes, including the Fuel XRF Programme.

The Authority will also maintain its system of meeting with other stakeholders in the fuel energy sub-sector to (among other things) discuss the challenges and opportunities that are inherent in the programme. The overriding objective is to find lasting solutions to problems in the energy sector, with the ultimate view of facilitating effective implementation of its obligations to Society.

Apart from that, EWURA also aims at enhancing client confidence in the importance of the XRF technology all round including to fuel dealers, who must be involved and witness the exercise of inspecting fuel products by using the XRF gadgets.

The Authority will also continue to provide education to people in general, and businesspeople in the sector, doing so through sensitization and awareness programmes via publications, TV and Radio broadcasts.

SOURCE: THE GUARDIAN
0 Comments | Be the first to comment