Fuel marking system to cost 8 centavos per liter

The government is set to roll out a fuel marking program that will cost at least eight centavos (P0.08) a liter in a bid to recover about P27 billion in foregone revenues yearly from smuggling.

The Department of Budget and Management’s Procurement Service and the Bureau of Customs (BOC) published a request for expression of interest for a private company to establish and operate a fuel marking and field testing system, as mandated under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

The price ceiling was pegged at P0.08 per liter over a five-year period.

The firm to be chosen by the government is expected to assist in establishing and operating a system that will supply and inject fuel markers in all taxable oil products, except Jet A-1, aviation gas, crude oil and liquefied petroleum gas (LPG), and do tests including fuel analysis and data management nationwide.

This month, the government will choose a maximum of five prospective bidders, which will be rated based on track record in implementing fuel marking here or abroad, qualification of personnel and current workload relative to capacity.

The five-year contract will be subject to an annual performance review.

“The government shall pay the contract cost for the first year up to P1.96 billion in case of overperformance in the actual volume of fuel marked,” bid documents read.

According to the TOR, the P1.96 billion will come from the national budget, while the second to fifth years of fuel marking and field testing operations will be covered via a trust fund to be established under the TRAIN Law.

In  2018, some 21.9 billion liters of fuel are expected to enter the country’s 25 ports and sub-ports. By 2022, the projected fuel volume would rise to 26.6 billion liters.

Based on Department of Finance estimates, revenue losses from excise taxes and value-added tax due to oil smuggling and misdeclaration reached P26.9 billion in 2016, almost half of the actual P52.6 billion collected by the BOC and the Bureau of Internal Revenue (BIR) that year.

The estimated foregone revenue for 2016 was computed by comparing the BOC and the BIR’s volume of removals of tax-paid fuels to the fuel consumption figure of the Department of Energy.

The Manila-based Asian Development Bank had a higher estimate of P37.5 billion in foregone tax revenues yearly from oil smuggling, while another study commissioned by the domestic oil industry pegged revenue losses at P43.8 billion yearly.

The fuel marking program is seen to pave the way for a national monitoring and field testing system that will enable the government to minimize the illegal entry, manufacturing, refining and distribution of taxable oil products around the country. —BEN O. DE VERA