The chemical marking of fuel to curb smuggling began on November 4th but the surcharge of $2.20 imposed on each gallon (48 cents per litre) of fuel to pay for the exercise has run into a barrage of criticisms from Omai Gold Mines Limited.
The fuel-marking exercise, overseen by Bio Code out of the UK at a cost of US$750,000 per annum, will allow the government to properly monitor fuel imports and is also expected to bring in line duty-free fuel imports. The cost of the exercise is to be borne by importers who have since passed on this cost to consumers. The surcharge represents an increase of .5% on a $400 gallon of diesel.
But the surcharge was imposed since September and will cost Omai US$250 000 per year. Omai's Human Resource Manager, Norman McLean, argues that there is no data to show that the exercise, which identifies legal sources of fuel via chemical marking, will realize more customs revenue for the government as enforcement is key for that programme's success.
"How will the charge ($2.20 per gallon) affect people working in the Essequibo, in the Pomeroon River, in dredges or in the Corentyne River who are getting their fuel from Vene-zuela? Who will enforce the charge (or the fuel-marking exercise there)?" McLean asks, asserting that the only way the programme makes sense is if it can be supported with effective enforcement.
"I do not think that exercise (fuel marking) will solve the problem," McLean asserts. He says Omai has taken its complaints to Prime Minister Sam Hinds and has also communicated its concerns with head of the Guyana Energy Agency (GEA), Joseph O'Lall.
McLean says Omai is not the only one against the surcharge, as importers Texaco and Esso are also opposed. Kenrick St Louis and Rodney Gun Munroe, area managers of Texaco and Shell, could not have been contacted for comments. But Ken Figaro, country manager of Shell Antillies, indicates that the firm understands the objective of the exercise and says that the increased costs have been passed on to customers. However, he says the firm may be making its own representations to deal with other issues associated with the project. Reggie Bhagwandin, Administrative Manager of Guyoil, sees the exercise as a progressive step to curb the illegal importation of fuel.
McLean says the surcharge will negatively affect other miners as well as Linmine's operation. Omai uses $4 billion in duty-free fuel per annum, which is tantamount to a tax savings of $1.4B.
However, a knowledgeable source argues that the issue is not one of policing the borders as the government has neither the manpower nor the equipment to do so but for inspections to be done at the known points of use of fuel around the country.
"The smuggled fuel has to be put at some established dump and this is where the inspection would be done. It is easier to do checks on stocks than to try and maintain guards on borders," the source argues. The source noted that the customs officials know the persons who carry fuel stocks and all the GEA has to do is send in a well balanced team to conduct routine inspection of the fuel to see if they bear the mark in the proportion it should. And minimise the risk of corruption, the teams will have to be varied as it would be difficult to corrupt everyone, the source said.
Additionally, duty-free fuel imports continue to be an issue of concern because of suspected abuse of the process, especially for foreign-funded projects. Stabroek Business understands that the GEA is currently lobbying the government to phase out over five years the duty-free status on fuel, arguing that fuel is a consumable item and should attract the 30% consumption tax.
Meanwhile, the GEA Act is soon to be amended to impose tough sanctions on fuel smuggling including a mandatory jail term for a first offence and forfeiture of the smuggled fuel and the vehicle or vessel transporting it.
Both the amendment and accompanying regulations are still with the government's legal draughtsman, Cecil Dhurjon, but are likely to be tabled in parliament next week. The amendment provides for a jail term on conviction of three years, plus fines running into millions and the confiscation of the products.
"It is a tough piece of legislation," says one source who saw the bill and regulations. A GEA official says should one be found smuggling, they would be jailed, their products confiscated and their bread would be on the line as their licence would be revoked.
The new requirements allow for the GEA to be the sole authority to issue licences, which will now include an importer, importer/wholesale, wholesaler, retail, bulk carrier, customer installation and storage licences.
The GEA began the chemical marking exercise from the start of November at all of the bulk stations and will soon send out inspectors to test the fuel batches to ensure they are in keeping with the ratio to the chemical markers as required.
The importers currently bear the cost of the fuel marking which works out to 48 cents per litre of fuel but this is being passed on to consumers. Once tests are done, the fuel found not to carry the mark will automatically be deemed illegal as well as fuel without the required ratio of marking since this could mean the batch was diluted with unmarked fuel.