Mumbai: At a kiosk on the Trichy-Thanjavur highway, one of southern India’s main trucking routes, drivers of motorized rickshaws, scooters and vans, belching black smoke, line up to buy water bottles filled with green liquid.
The bottles contain diesel or petrol diluted with kerosene, which the government subsidizes to provide low-cost cooking fuel for the poor. Kiosks sell the mixture for as much as 10% less than gas stations do.
“My mileage gets hit, but it’s cheap,” says Kaja, who uses only one name, as he waits to fill his autorickshaw.
Adulterated fuel is choking India’s cities and costing the government $6.5 billion a year in wasted subsidies and lost taxes, says Bhamy Shenoy, who advised the US Agency for International Development from 1997 to 2002.
In the year that ended on 31 March, India spent $19 billion to subsidize fuel, including $4.8 billion on kerosene, according to the oil ministry.
As much as half the 9.4 million tonnes of kerosene India produces each year ends up in adulterated motor fuel, Shenoy says. Kerosene, which isn’t taxed, costs Rs9.05 a litre in Mumbai. Motorists pay Rs36.08 for diesel.
The sale of illegal fuel also undermines efforts to improve air quality. Kerosene produced in India contains as much as 2,000 parts per million of sulphur, a major component of smog, exceeding the maximum 350 parts mandated for diesel sold in major cities, says Desikan, trustee of Chennai-based NGO Concert, which lobbies against fuel tampering. Desikan uses only one name.
The scam works in various ways. Most commonly, criminals pay employees of regional distribution centres to dilute diesel and gasoline with kerosene, Desikan says.
In other cases, tankers are diverted to secret depots where kerosene and petrol are mixed, then shipped to 34,000 official gas stations, where most of the adulterated fuel is sold, Shenoy says.
Racketeers have to pry open and replace locks on fuel tankers. Bharat Petroleum Corp. imported tamper-proof locks and fastened global positioning system devices to its 4,000 tankers to monitor their movements, says Arun Singh, its deputy general manager for retail network planning.
Oil companies deny that corruption is endemic and say they are trying to curb racketeers. “If we find any collusion between our employees and the system, we take action against our own people,” says A.M.K. Sinha, executive director for retail at Indian Oil Corp., the country’s largest refiner.
M.S. Srinivasan, the oil ministry’s top civil servant, says the national government isn’t to blame. “Not enough is being done to curb fuel adulteration, especially by state governments with whom the implementation lies,” he said.
In 2006 the government ordered that a blue dye be put in kerosene so inspectors could see when fuel has been adulterated.
“It hasn’t affected my supply,” says Saravanan, a kiosk owner who uses only one name. “Everyone is paid to stay quiet.”