FINANCE Secretary Carlos “Sonny” Dominguez 3rd, placid, dignified man that he is, would likely not go to any great effort to claim credit for putting an end to one of the Philippines’ biggest and most expensive smuggling problems. That credit is well-deserved, however, because now that the long-awaited fuel-marking program is finally being implemented, a major source of corruption and revenue leakage will soon be removed.
Fuel marking is the introduction of a traceable organic compound to fuel before it leaves a depot for distribution. The shipment of fuel can then be traced with the use of simple detection equipment, which prevents various forms of fraud such as diluting the fuel, delivering it to a different destination or substituting it with a different grade.
The fuel-marking program, which is primarily intended to stop smuggling and was part of Republic Act 10963, or the “Tax Reform for Acceleration and Inclusion Act,” finally got under way this July, and is scheduled to be fully implemented by Jan. 30, 2020. The Department of Finance (DoF) has estimated that full implementation of the fuel-marking program could recover up to P40 billion in lost tax revenue yearly for the government. The contract for the fuel-marking program was won by the joint venture of Switzerland-based Sicpa SA and SGS Philippines Inc.
The program was originally supposed to be implemented last year, but delays over a few technical issues and a great deal of resistance from the country’s oil companies stalled the initiative. By now, however, everyone has gotten on board with the program, which they ought to, since it is legally mandated, with Seaoil claiming the honors for being the first; fuel marking was begun at its Mabini, Batangas terminal on July 9.
Since Seaoil implemented the fuel-marking program, more oil companies have followed suit, including Unioil Petroleum Philippines Inc. and Insular Oil Corp., both with terminals in Mariveles, Bataan; Chevron Philippines, which operates under the Caltex brand, at its facility in San Pascual, Batangas; and Shell Pilipinas Corp. at its North Mindanao Import Facility in Cagayan de Oro.
The implementation of the fuel-marking program by Shell is noteworthy. Pilipinas Shell Petroleum Corp. is the country’s second largest oil company, while parent company Royal Dutch Shell is the world’s seventh largest, and since the beginning of the process to roll out the fuel marking program, had been the largest and most vocal of the several oil companies actively resisting implementation of the program, largely because of technical concerns. Shell’s particular concern was the mandate to implement a manual fuel-marking process; it had expressed a strong preference for an automated process — which it considers safer and more reliable — and had aggressively lobbied the DoF to delay the program beyond its January 30 deadline.
Secretary Dominguez, however, refused to budge, and insisted that the original deadline be observed. It is this firmness that will reverse the P40-billion annual loss of revenue from fuel smuggling and provide the country with up to P20 billion in additional tax collections each year. Pilipinas Shell may not have liked the idea of facing additional cost and effort to implement a fuel-marking program, but the DoF’s steadfast position gives them no choice. In return, Dominguez has offered them a bit of flexibility to work out their technical challenges.
Secretary Dominguez deserves credit for taking the broad view, and pressing forward with a program that will have the biggest possible impact, not just in terms of collecting revenue to which the government is entitled, but in improving the country’s defenses against large-scale smuggling. Pilipinas Shell, on the other hand, also deserves credit for finding a way to work with the DoF on the fuel-marking program, and rolling out the system to the extent it is able as a show of good faith.
Shell’s coming on board with the fuel-marking program is an important example to other oil firms that have not yet worked out their implementation compliance. Shell should continue to be an example to its industry by working to expand its fuel-marking activities from its Mindanao terminal to its refinery facilities in Luzon, its biggest market.