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Fuel licenses

Jan 11, 2019 Features / Columnists, Peeping Tom

 

Fuel is the largest contributor to import duties. In 2017, the government collected over $21B in import taxes on petroleum and its by-products. No other commodity brings in this amount of import taxes.
The downside is that the importation has to be paid for in foreign exchange. In 2017, Guyana imported US$394.5 M in fuel, twice as much as it did on food.
The high import taxes on fuel and the importance of these taxes to Government revenues make fuel attractive for smugglers. Strict controls on the importation of fuel should therefore be a mandatory if fuel smuggling and tax evasion are to be curtailed.
Strict controls are also necessary for safety since fuel is highly combustible. The storage of bulk fuel therefore requires importers to have bulk storage facilities which meet specified international safety and environmental standards. These bulk storage tanks are usually required to be located away from residential and business areas because of the risk of explosions and fires.
The establishment of bulk storage facilities requires costly infrastructure investment, and that is why traditionally the importation of fuel was restricted to large multinational companies – Shell (now Sol), Texaco (now Rubis) and Esso – along with the state-owned oil company GUYOIL. It was only these companies which could afford to put in the infrastructure needed for bulk importation of fuel.
The government has little worries with these companies. The foreign multinationals have reputations to protect and strict accounting standards. They hired large vessels to transport fuel and have storage facilities for bulk storage of fuel. They have always operated within the laws of Guyana.
But while these companies were legally importing their fuel, there were persons smuggling on the high seas and across our borders. Guyana’s vast coastline and unmanned borders made it easy to smuggle fuel. This has resulted in massive revenue losses for the state.
At Eteringbang alone, where the GDF has a base, the Guyana Revenue Authority estimates a loss of $20M per week. In order, to reduce the massive loss of revenues from the smuggling of fuel, the PPPC government introduced a fuel marking system.
The fuel marking system was however found to have deficiencies. A forensic audit by the government into the Guyana Energy Authority, the agency in charge of fuel marking system, found weak internal controls, lack of proper validation of fuel marking reports and problems associated with the dispensing of markers to the fishing industry.
When in government, the PPPC tried to support the trawlers and seafood industry by granting them permission to import and store their own fuel. This system set a dangerous precedent and opened the floodgates for private individuals to apply for fuel import licenses when the APNU+AFC took office.
As this newspaper reported, a mere five weeks after assuming office, the APNU+AFC granted a fuel licence to a company which was only registered three months prior to the May 11, 2015 general elections. The grant of another licence months later, ignited a stinging rebuke from the Mirror newspaper which pointed out to the speed with which these licenses were granted considering that an importer is normally required to have bulk storage tanks, obtain an environmental impact assessment and at least four other permits concerned with storage, transportation, safety and importation.
The Mirror alluded to a period of nine months to obtain these permits, yet the licenses were granted in less than four months.
Fuel licenses should not be granted unless the necessary infrastructure, facilities and safety and environmental standards are in place. The government should undertake a review of the criteria that are used for granting licenses.
These licenses can rightly be considered as property and therefore cannot be arbitrarily revoked unless there is misconduct or laxity in meeting the requirements to hold such a license. But at least a start should be made to ensure that the necessary requirements are being met.

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