Audacious diesel scam

Diesel scam in Karachi involved use of 53-metre tunnel to siphon fuel from PARCO pipeline for “a long time”

The massive diesel theft scam recently uncovered by Customs officials is among the most stark illustrations of the extent of the black market for various goods and its impact on society. It is not just a matter of government revenue, as most reports are focused on. In fact, the black market is one of the reasons why the government squeezes active taxpayers so tightly. If the multibillion-dollar black market could be brought into the tax net, it would also bring a massive increase in government receipts, which in turn could be used to pay for necessary government services, or even to reduce the income tax burden on individuals.

The diesel scam in Karachi involved use of a 53-metre tunnel to siphon the fuel from a PARCO pipeline for “a long time”. The diesel was reportedly transported to a “suspicious” edible oil factory, from where it was distributed further. Although the factory owner has been nabbed, authorities have not confirmed if arrests have been made further down the chain. However, it is impossible to operate such scams without the knowledge of at least some participants at other stages of the distribution network — petrol pump owners would notice if a supplier can undercut market prices or if their diesel deliveries are coming from a cooking oil factory.

But the fact is that enforcement is still weak enough that many aspiring criminals see the profitability of black market operations as being well worth the risk. While every government claims to be combating black market operators, the reality is that the big guns in the illegal trade have connections in every party and power centre, which is why crackdowns often start with a boom and end with a squeak, and the only people who end up paying are the enforcement officials whose careers are derailed for stepping on powerful toes. This is also why digitisation of the economy is important, as it makes it harder to complete and easier to detect the kind of under-the-table payments on which black markets depend.

Published in The Express Tribune, January 26^th, 2024.

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