Thursday, 22 October 2015 16:36

Fuel fraud fight in Africa: The National Petroleum Authority shows way - IMANI



Refined petroleum products are an important resource in every country.
Various governments impose taxes on fuel to generate revenue that finances essential public goods and services for the benefit of the citizenry.  Governments also provide a boost to targeted sectors of the economy or help the needy by way of fuel subsidies.
An unintended effect is that the price differentials created by these taxes and/or subsidies produce a financial incentive for unscrupulous individuals and businesses to engage in several forms of fuel fraud.  These include: smuggling, adulteration and dilution of fuels, transit fuel diversion and round-tripping as well as outright theft.

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Moreover, fuel fraud is not just an in-country problem but can cross borders where cheaper, inferior products are smuggled in as adulterants or subsidized fuels are smuggled out to neighbouring countries where they sell at higher prices. Smuggling of unwanted adulterants into Philippines’ fuel supply chain, for instance, has been estimated to cost the country as high as $750 million annually in tax revenue. This money could certainly have done a lot for the Philippines. This makes one wonder how much African countries are losing annually due to fuel fraud. The situation could be worse for African countries that simultaneously tax certain petroleum products and subsidize others.

This is because not only is the expected tax revenue not realized but the subsidies are also wasted as they are diverted from the targeted recipients to criminals. The government loses twice when crooked businesses dilute taxed fuel with the cheaper subsidized products.
Attempts have been made in the past to mark or identify various fuel products in order to prevent fraud. For example, fuel marking with dyes has been in use since the 1950s but can be easily defeated using cheap and simple methods to launder out the dye. However, newer technologies using molecular markers as part of an overall fuel supply chain protection program have proven to reduce existing criminal activities and deter others. The impact of fuel fraud, how fuel marking programs operate and the results of some current African programs are presented here to support the further adoption of this technology across the continent.

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