By David Mugabe
Adulterated fuel on the market is rising mainly boosted by the easy availability of cheap kerosene used for mixing, fuel distributors have said.
Kerosene is the major ingredient used in mixing to create contaminated petrol and diesel-the two most used fuels. The elimination of excise duty on kerosene during the June 2013 budget pronouncement has boosted fuel adulteration because imported kerosene is now exempted from excise duty.
“There are many fraudulent people who are deliberately giving people products which on the eye are petrol or diesel, but in reality it is not,” said Vivo Energy boss, Ivan Kyayonka, during a tour of the company facility recently. Vivo is the company that took over the marketing of Shell fuel brands.
For most vehicles, up to 20% kerosene mix will start the engine, but it slowly disturbs and destroys the engine because of causing incomplete combustion. Both kerosene and petrol are from the same product, but are separated by a chemical process.
“It is tempting, but very damaging. They are getting in excess of sh850 per litre advantage by adulterating,” said Kyayonka.
Kyayonka said they have proposed to the finance ministry that the sh200 imposed on Kerosene be used to buy solar panels that are then distributed to the rural population because the sh200 removed has very little impact. The ministry is yet to accede to the suggestion.
Richard Kamajugo, the Uganda Revenue Authority (URA) commissioner for customs, said one way to contain the adulteration is by minimising the benefi t of using kerosene by reverting to the excise duty.
“The incentive (to adulterate) is massive by taking away excise on kerosene, it is like you are handing over this money to somebody, it is a free for all,” said Kamajugo.
URA has been collecting about sh15b in excise duty from the kerosene tax. Kamajugo also feels the over liberalisation of the industry perpetuates the practice.
This is because, a situation which has meant that even when the sh200 surcharge was scrapped, fuel dealers have not reduced their fuel costs, meaning there has been no impact on the common man-tax or no tax on the kerosene.
The adulterated fuel is consumed almost immediately and tracking it is quite difficult.
There are close to 100 fuel dealers, but only four belong to the umbrella fuel association, according to Kyayonka.
This has meant little control and attempts at regulating their activities. Thus the promotion of quality is generally low with the focus more on pricing.
UNBS chief Ben Manyindo conceded that adulteration is a criminal activity and very difficult to regulate. UNBS has four testing points, but the practice has still been impossible to eliminate.
Shell is developing a strong quality process in which some of the products are reblended even when they come through the pipeline which is used by all the fuel importers. For instance, because of the blending, diesel extra does not foam, which reduces the amount of fuel the motorist pays for, according to Kyayonka.
Initially, Shell was concerned that drivers were siphoning petrol and replacing it with kerosene. This has been gradually eliminated. Transport owners also now face sanctions if their drivers are found adulterating fuel.