ECC decides to add fuel marker to SKO

The Economic Coordination Committee (ECC) of the Cabinet headed by Prime Minister Shahid Khaqan Abbasi has decided to add fuel marker in superior kerosene oil (SKO) to counter adulteration and discourage tax evasion, official sources told Business Recorder.
Petroleum Division, sources said, informed the ECC in its meeting that annual production of superior kerosene oil (SKO) was approximately 140,000-150,000 metric tons. All SKO is being produced locally and is not dyed. The present price differential between SKO and high speed diesel (HSD) is approximately Rs 31.40 per liter, which provides temptation/potential for adulteration in HSD by adding kerosene, which not only lowers the availability of SKO to the intended beneficiaries (the poor man) but also impacts government revenues on HSD.
The sources said in order to discourage fuel adulteration and tax evasion, etc, a meeting was held under the chairmanship of the then Minister for Petroleum & Natural Resources (now prime minister) on December 13, 2016 wherein it was decided to introduce Fuel Marking Program (FMP) in the country in a phased manner ie to mark primarily all SKO and thereafter other fuels such as HSD, light diesel oil (LDO) and petrol.
A Technical Committee (TC) with representation from OGRA, refineries and Hydrocarbon Development Institute of Pakistan (HDIP), and headed by Oil Companies Advisory Council (OCAC), was constituted to select a single fuel marking company (FMC) through standard bidding process. The OGRA expressed its inability to participate in commercial phase of the FMP, however, assured to perform its role at implementation and monitoring stage. In pursuance of the objective, the TC-headed by OCAC completed the bidding task. M/s Authentix, the UK, was the successful bidder with a quoted cost of Rs 1.22 per litre for the fuel marker of marked product for six months trial period.
Furthermore, in order to update SKO specifications in accordance with latest fuel quality standards, revised/ updated SKO specifications were prepared in consultation with oil industry including "blue dye" to avoid SKO adulteration in other petroleum products.
The Petroleum Division submitted the following recommendations for consideration and approval of the ECC: (i) in accordance with the relevant provisions of OGRA Ordinance 2002 and the Rules made there-under, the issues pertaining to adulteration and quality maintenance for petroleum products fall within the domain of Ogra. The Authority may, therefore, supervise/monitor all activities, at all stages relating to the implementation of FMP and may act as a focal point for effective enforcement in close coordination with all the concerned stakeholders; (ii) the OCAC may execute the contract with the successful bidder to implement kerosene FMP in accordance with the parameters specified in the instructions to bidder (ITB) document. The OCAC may also liaise with the representatives of TC, FMC and relevant government authorities for successful implementation of kerosene FMP under the supervision of Ogra; (iii) the actual cost of the fuel marker obtained through tendering process by OCAC may be included in the ex-depot sale price of SKO through existing monthly pricing mechanism. The cost quoted by successful bidder is Rs 1.22 per liter for six months trial period. The successful bidder has, however, committed to providing 3% price reduction for increase of program duration beyond trial period (minimum six months additional). Initially, the FMP is proposed to be implemented for one year, and then depending on efficacy of the program it will be extended accordingly with the consent/approval of Ogra or fresh tendering process will be initiated by OGRA through OCAC. Before commencement of FMP, the FMC will give presentation and actual demonstration to the TC and Ogra on various aspects of the program; (iv) the Ogra may also ensure that SKO has been marked before leaving refinery premises and may independently inspect quality of SKO, HSD and MS with the help of HDIP and/or other third party inspectors at different stages of the POL supply chain ie local refineries, OMC depots and retail outlets in order to check/curb adulteration. Based on positive identification of adulteration and non-compliance, the OGRA may initiate further actions as per relevant rules and; (v) for deregulated fuels, the OMCs may be directed to arrange fuel marking services out of their margins; however, the Ogra may carry out field testing and other related activities.
During ensuing discussion, the chairperson Ogra stated that Ogra is bound to follow PPRA Rules which in the instant case have not been followed. She was of the view that prior inclusion of maker price in kerosene price, Oil Companies Advisory Council (OCAC), being representative of oil sector, must ensure to adopt bidding process/procedure as prescribed in PPRA Rules. She suggested that legal opinion may be sought on the issue before proceeding further. Secretary Petroleum Division responded that oil refineries are private entities; therefore, PPRA Rules are not applicable on them.
After detailed discussion, the ECC approved addition of fuel marker in superior kerosene oil to counter adulteration.