Govt unearths Rs135b petrol scam

Dangerous adulterant sold as high quality petrol damages engines, costs treasury

ISLAMABAD:

The government has uncovered a staggering Rs135 billion scam involving the import of a highly inflammable and dangerous petrol adulterant, marketed as high-quality petrol. This scheme has damaged car engines and caused significant financial losses to both consumers and the national treasury.

Customs Intelligence initially unearthed the scandal in May but it remained buried in official files until July 29th, when the Prime Minister’s Office intervened and ordered an immediate halt to the illegal activities.

The importers, operating through the Taftan-NLC Dry Terminal, were bringing in Light Aliphatic Hydrocarbon Solvent—a hazardous petroleum product—and selling it as petrol with the complicity of customs officials and laboratory personnel, according to official documents. A test check on the importers found that 26 out of 36 addresses were fake.

“The (Light Aliphatic Hydrocarbon Solvent) product is petroleum and, by virtue of its flash point less than 24C, it also constitutes dangerous petroleum,” stated an official report.

There are credible reports of the solvent being used as an adulterant in petrol and being directly offloaded at filling stations, as per documents from the Customs Intelligence & Investigation office in Quetta.

Documents revealed that in less than three years, 900 million litres of the adulterant were imported and sold as petrol, resulting in a Rs135 billion loss, including Rs40 billion in duties and taxes. The adulterant, imported as an industrial chemical, was cleared from the port by paying a nominal duty but sold as petrol at filling stations, showed details.

The Customs Intelligence documents further disclosed that until recently, the Pakistan Council for Scientific and Industrial Research (PCSIR) Quetta facilitated the free import and clearance of the solvent. This role was later assumed by the Hydrocarbon Development Institute of Pakistan Quetta Testing Centre.

Customs Intelligence recommended that future imports of the product should require a petrol import license and established storage facilities. Last week, the government mandated compliance with licensing and testing requirements for petroleum product imports as defined under the Petroleum Act and Petroleum Rules. The low-quality petroleum products were being imported and declared as Light Aliphatic Hydrocarbon Solvent through the NLC dry port Quetta, according to the documents.

The Prime Minister’s Office took serious note of the investigation’s findings.

“Besides the damage to vehicles, there has been a corresponding massive loss of revenue from the substitution of higher-value standardised petrol,” according to the findings.

“Given the price differential between the adulterant and standard petrol, those running this racket must have made a fortune,” wrote Director Intelligence Customs, Muhammad Saeed Wattoo, in May. However, the documents remained unaddressed until the PM’s Office intervened.

The PM’s Office wrote to Petroleum Minister Dr Musadiq Malik, stating that the findings highlighted serious issues of ongoing malfeasance involving the illegal import and sale of the dangerous petroleum product in violation of the Petroleum Act and Petroleum Rules.

The substance, normally used in paints, was excessively imported to mix with petrol. “There is an indication of the collusive role of customs, HDIP’s Petroleum Testing Centre at Quetta, and other regulatory and monitoring departments in the alleged scam,” said Rana Ihsaan Afzal, Coordinator to the Prime Minister.

The director general of explosives at the Ministry of Energy endorsed the findings of the Customs and Intelligence Directorate in Quetta, as per correspondence between the PM’s Office and the petroleum minister. The PM’s Office has called for holding government officials involved in the scam accountable.

The Ministry of Energy confirmed that the Hydrocarbon Development Institute of Pakistan (HDIP) test shows the Light Aliphatic Hydrocarbon Solvent has a flash point below 40°C, and the Pakistan Council of Scientific and Industrial Research (PCSIR) reports it as less than 0°C, classifying it as dangerous petroleum.

Petroleum products with a flash point below 76°F are considered dangerous. The ministry noted that while the solvent can be mixed to resemble petrol, it lacks the Research Octane Number (RON) specifications for petrol. Thus, a license is required for its import, as it is categorised as dangerous petroleum.

In May, Director Customs Saeed Wattoo informed the Ministry of Energy about the inquiry into the alleged import and clearance of the solvent. Customs data showed that no solvent was imported from Iran via Taftan-NLC Dry Port Quetta until 2021. However, in the fiscal year 2023-24, about 383 million tonnes of the solvent were imported, a 14,000-fold increase from 2021-22.

Over 900 million litres of petrol-equivalent solvent were imported through the Taftan border, according to Customs Intelligence data.

“The preliminary inquiry reveals that the purported industrial consumption of the product primarily in the paint and varnish industry is a subtle subterfuge for the massive free import of a restricted product.”

In October last year, the Directorate of Intelligence and Investigation Customs Lahore seized oil tankers in Lahore. A report from Textile Testing International, Lahore, confirmed that “the substance is petrol with slight mixing of any solvent” and did not meet OGRA specifications. Despite the findings, the government has yet to act against those facilitating the imports and distribution of the adulterant in the market.