Fuel licences

Mar 22, 2019 Features / Columnists, Peeping Tom

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It defies reason why the PPPC and the APNU+AFC, both of which have expressed concerns over the loss of revenues from fuel smuggling, would wish to slacken the controls on the importation of fuel by granting licences to private individuals and associations.
What is even more perplexing is why such licences were granted to individuals and companies which did not have the requisite storage capacity and infrastructure normally associated with fuel importation.
Fuel, as readers will recall, is the largest contributor to import taxes. In 2017, it raked in $21B, which is far more than what was earned by any other commodity. Last year, it pulled in an additional six billion dollars for the State.
The Guyana Revenue Authority (GRA) believes that billions of dollars are being lost to fuel smuggling each year. At Eteringbang, where the Guyana Defence Force has a base, the Guyana Revenue Authority estimates a loss of $20M per week or about one billion dollars per year.
A fuel marking scheme was introduced under the PPPC to reduce fuel smuggling. The scheme was originally intended to be administered by a multi-agency task force but unfortunately has found itself being exclusively administered by the Guyana Energy Authority.
The fuel marking scheme has been dogged by controversy with reports of fuel markers finding themselves into the open market. This newspaper was even able to obtain fuel markers, showing how loose the system was.
The APNU+AFC has taken no steps to revert to the original idea of having more than one agency administer the fuel markers so that each can act as control over abuses by the other.
Nor has the government seen it fit to tighten up on the importation of fuel. In fact, it has liberalized the grant of licences, issuing licences to known supporters of the ruling coalition.
Fuel taxes are prohibitively high. This makes it highly attractive for fuel smugglers.
Safety concerns also dictate the need for controls. Fuel is highly combustible. Bulk storage of fuel requires bulk storage facilities which should be constructed in accordance with international safety standards and located away from residential and business premises.
This infrastructure is not cheap. It is costly but necessary for human safety. Yet, licences have been issued to firms which have not invested in bulk storage infrastructure. They are merely trading in fuel, something which was once reserved only for the big oil companies – Shell, Esso, Texaco and GUYOIL, now Sol, Rubis and GUYOIL.
The large foreign multinationals have rigorous international accounting systems which guards against illegality. They are not likely to want to harm their international reputations by engaging in fuel smuggling or avoiding the payment of fuel taxes.
Five weeks after coming to 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 to the speed with which these licences 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.
Recently, it was reported that even RUSAL was granted a licence to import fuel. This company enjoys duty free concessions on fuel and there is no reason why, like companies such as OMAI did in the past, it could not have sourced fuel from the major oil multinationals operating in Guyana.
There is no reason why also the trawlers association could not have been given concessions on fuel while purchasing from these same multinationals. It would have allowed for greater controls on the importation of fuel and less work for the revenue officers.
The GRA in recent times has launched investigations against some of the new companies which were granted fuel licences. The reports in the media have provided details of some of the allegations but there have been no reports about the penalties, if any which were imposed for any violation.
Yet this is the same GRA if when a businessman brings in a container it is found to have a few extra items, is bound to descend on that person and extract the payment of the additional duties plus huge penalties.
What is good for Peter must be good for Paul. The same system should be applied for any persons found smuggling fuel. The penalties must be equally severe and not simply a slap on the wrist or no slap at all.
The government must tighten up on fuel importation. It must insist on proper storage and safety infrastructure by licencees. It should not issue licences strictly for trading purposes, without the requisite infrastructure. It is time to relook at the conditions under which fuel licences are granted.

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