This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also

the Recent Increase of Oil-

Mafia and Killing of Innocent Regulating Officers

PDS Kerosene Distribution System in India and Increasing the Role

of Oil Mafia for Adulteration of Petrol Bunks: A Critical Analysis
Dr. SRK Reddy*

Preamble

The channelization of PDS kerosene system was yet to be properly channelized

since Independence though the country has achieved notable development in
technology and also infrastructure development. Several states has been introducing
computer eyeball technology ration cards for curbing duplication in distribution of
PDS items especially kerosene but still diversion of kerosene and adulteration was
rampant in several districts across various states in the country. Even the too much
intervention of political leaders while allocation of petrol bunks to the party cadre was
the real opportunity to the oil mafia and the adulteration of kerosene increasing
drastically in recent years and thereby more money earnings. The network of oil
syndicate in different districts in the country was managing the collection of PDS
kerosene through agents and the same scenario was exists in rural Indian villages.

Every month the kerosene agent visiting the villages for collection of kerosene from
ration card holders as he was paying Rs. 25 per litre and he was selling the same to
roadside daba’s and petrol bunks at Rs. 32 per litre. Interestingly the famous Gas
agencies opened their outlets in mandal’s / smaller towns and 60-80 % of rural
households covered under subsidised gas distribution at Rs. 350 per cylinder.
Majority of households in the rural villages were using the firewood for heating the
water and the cooking was made through gas usage.

This was the reason when the present author submitted the report on
‘Channelization PDS Kerosene System and Curbing Adulteration’ to Civil Supply
Department of Andhra Pradesh and suggested that there was a need of open market
system with reasonable price can curb the adulteration. Even the state government
issued un-authorised ration cards during election time and latter government has
taken screening the eligible candidates who were there under below poverty line. It
was observed that some of the households were obtained the white ration card for

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

availing medical reimbursement scheme implemented by government for those who

were undergoing operations for various ailments.

PDS Kerosene Distribution and Adulteration of Petrol Bunks

Adulteration was rampant in many petrol bunks across various cities in the country
and the District Supply Officer was unable to tackle the issue due to political
pressure and also threat to his life and sometimes a nexus between petrol bunk
people and the said officer allowing the process on regular basis. Though CNG gas
bunks opened in several cities still the oil mafia managing the adulteration process in
many cities and the real victims were the vehicle owners and sometimes sincere
officers paying their lives when they suddenly go for checking without opting for
greedy money from oil mafia.

There were two occasions the oil mafia offered ransom money to the present paper
author when he was conducting study on ‘Channelization of PDS Kerosene System
in Andhra Pradesh for Avoiding Rampant Adulteration. One was the case at
Singarayakonda of Prakasam district and other one at Thirupati in Chittoor district,
Andhra Pradesh. In both the cases the petrol mafia was managing PDS kerosene
tanks directly from Civil Supply Department and the local DSO was mingled with the
owners of petrol bunks and they offered huge amount for not highlighting their case
studies in the report and somehow the author was managed from them and indirectly
reported in the study and shared the episode with the then Civil Supply
Commissioner. Due avoid this situation the report has given firm suggestions for
open market accessibility of kerosene and also less price variation between open
market and PDS kerosene of not increasing of quota for petty vendors who were
also responsible for diversion of kerosene from PDS shops. However the
punishment system was not strong in many cases and oil mafia was supported by
politicians and it was difficult for an officer who wants to take firm punishment against
the people behind the adulteration and it was clear that the two sincere officers
belong to Indian Oil Corporation and District collector in Bihar and Uttar Pradesh was
killed by oil mafia for not supported not allowing adulteration in the petrol bunks. The
pathetic situation that, even the central government has announced Rs. 25 lakhs

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

compensation to the victim family and ordered for probing the incident. As long has
laws and punishments were not stringent in the country and this type of killings on
innocent officers can continue further and there was no end for such mafia activities.

Oil Mafia Role in Adulteration-Channelization Kerosene Collection Agents in

Rural Villages

Mafia gangs were rampant in India especially northern, north-east and western parts
of India and now it was extended to south and central India where the easy money
available through number two activities like land settlements, fake currency
transactions, drugs, film making, petrol / diesel adulteration and indirectly supporting
the politicians for getting elected in their constituencies and also mobilising people
for rigging of votes. Even the channelization of kerosene collection network was well
expanded to remote villages where every month first week the collection agent can
go to the respective places for collection of PDS kerosene distributed to BPL families
and the price was given them between Rs. 25 to Rs. 28 depending on demand and it
was sold in the nearby roadside daba’s where lorry tanker drivers used to sell
unauthorized petrol and the adulteration was more and some these agents can sell
the PDS kerosene directly to the petrol bunk owners.

The irregular issue of while ration cards to the BPL families was the main reason for
misusing of welfare support given by the government and in the recent scrutiny
several lakhs of bogus cards were fund in the rural and urban areas. It was a vicious
circle problem, where before elections politicians were ordering more issue of cards
for vote bank politics and later when they receive complaints and they again appoint
a taskforce for elimination of such bogus cards. Even the classification of BPL
families has to be re-checked as some of the families in rural areas were having
good amenities due to one of its family member working in IT sector or he may be
working in the abroad, as many south Indian families were preferring technology
courses like BE and B.Tech as some of the governments reimbursing fees for
encouraging SC, ST, OBC and Minority students. So the income sources were
increased in some of the rural households and their incomes wrongly quoted while
issuing cards to the BPL families.

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

Variation between Crude oil Import Price and Retail Sale Price of Petroleum
Products in Domestic Market

It is interesting to note that, Govt. of India has been imposing so many taxes and
duties while allocation of petrol, diesel and other allied products to wholesale and
retail markets including Oil Corporations. The import price of crude oil was around
Rs. 35 rupees and GOI selling the final products like petrol at Rs. 65 in retail market.
So, central government should not depend on oil price for generating revenue for
meeting budgetary provisions and rather government should look for boosting of
more exports of quality products and it should look for curbing of corruption as the
recent study shows that the corruption was 10 % of country GDP and now it has
been increased to 50 % respectively.

In view of the huge variation between import price and domestic final product price
was allowing the oil mafia to go for adulteration of petrol and diesel and even PDS
kerosene was also diverting towards black market operations. OPEC countries were
having monopoly control on petroleum products export across various countries in
the world and sometimes price variation in export had direct impact on crude oil
imports of any country but in case of India government has imposing some irrational
taxes and duties and there by supplying the petroleum products in the domestic
market.

Raising of Green Vehicles in India and Negligible impact on Adulteration

Ministry of Urban Development, Govt. of India under JnNURM has allocated green
vehicles to various cities in the country and accordingly CNG busses were running
very effectively and only hurdle was that maintenance of vehicles not up to
expectations of the scheme as many state road transport departments doesn’t have
proper wing to look after the vehicles. Similarly, many private transport operators
were also introduced CNG kits including three seated auto vehicles. So, it reveals
that the green friendly vehicles may not have an impact on petrol adulteration and a
limited impact was there on curbing greenhouse gases. Multiple uses of petroleum

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

by products were making the market more vulnerable and oil mafia was utilising this
opportunity for money generation.

So, in reality the vast usage of domestic gas for cooking and CNG in vehicle has not
curbed the adulteration process and rather it was increased drastically in recent
years and proper social audit, accountability and converging of LPG, Kerosene and
other resources distribution in order avoid duplication in delivery system. Even the
Asian Development Bank (ADB) has formed Climate Investment Fund (CIF) and
helping around 13 countries and guidelines were also given to Indian government to
undertake climate friendly projects including solar power and curbing Green House
Gases (GHG’s) impact on climate change. Efforts are on to undertake Climate
Investment Fund mobilisation in the country with the active participation of
commercial banks and corporate companies.

Political Lobby behind the Allocation of Petrol Bunks

During the NDA government period the allocation of petroleum bunks were dome at
larger level and many bunks allocated to political background people who had mafia
links and badly require block money support for getting vote bank. During UPA
government regime the allotment of petrol bunks to the political backup people were
thoroughly scrutinised and a very few licenses cancelled and allocated the same to
genuine candidates. As off now around 90 % of the petrol bunks were there under
the control of politically influenced individuals who had very good nexus with oil
mafia and network with rural and urban poor community for getting vote bank during
elections.

Regularization of petrol bunk licenses and stringent action on adulteration of petrol

wasn’t given many results in recent years due to the influence of externalities and
political and administrative will was missing in the process. However, a few officers
were the victim of oil mafia who was covered by leading politicians in the country. As
per the latest estimates on MP elections in India shows that, around Rs. 10-20
crores was minimum required for getting seat and spending money for votes and
maintaining mafia and goonda’s.

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

Commercial use of PDS Kerosene by Petty Vendors

It was well known fact that many petty vendors were using maximum PDS kerosene
and LPG for commercial business apart from the original allocation given by Civil
Supply Department. As per the latest estimates around 20 % people migrated to
medium and major cities were started petty food business activities for the livelihood
and the curry centres were mushrooming to serve the food needs of un-employed
youth and students who were pursuing their courses in the cities. The country like
India which was having more than 120 crore population need systematic regulation
process on petty vendors who were using un-authorised PDS and LPG for
commercial activities and escaping from the taxes. On an average a petty vendor
running mobile food centre was earning nearly Rs. 1000 per day after deducting
expenses of raw material used for petty business. That shows on an average his
earnings were crossing more than Rs. 3 lakhs in a month and using BPL family un-
authorised kerosene and LPG on daily basis.

Off-course one rational person can object the analysis made in the above by
comparing corruption of politicians, bureaucrats and professional and petty vendors
misuse may not be the bigger issue. But on accountability terms the percentage of
petty vendors who were diverting the PDS kerosene and LPG was much higher than
the political, bureaucrats and professional community.

Kerosene Open Market with Rational Pricing-Better Option for Curbing

Adulteration

However, several studies conducted by some of the leading consultancy agencies

including the present author has suggested that better allow open market kerosene
distribution with less price variation between PDS kerosene and market price. The
respective state government can promote kerosene open market bunks on random
basis in selected cities and the open access of kerosene can reduce the black
market operations and also adulteration. However, the rational price variation
between petrol, diesel, CNG and kerosene can have lot of impact on fuel utilities for
cooking, water pumping and transport operations.

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

Reasons were unknown why the central government not taking any stringent
measures in case of rational price fixation for various fuels and there by reduction of
adulteration via-se-versa curbing oil mafia role in petrol bunks and also diverting of
PDS kerosene for black market.

Repeated Killings of Oil Adulteration Regulation Officers-Role of Government

In recent years oil mafia has taking the advantage of political support and attacking
the officials of private oil distribution companies and district officials who were trying
for regularisation of adulteration in petrol bunks and a few officers died in the
process of duty. The recent killing of district deputy magistrate in Uttar Pradesh has
given lot of shock to the state and central government to tackle the issue with great
caution. The petroleum ministry has directly issued the regulatory measures to the
state government including private companies. Many district supply officers were
mingling with the local petrol bunks and very few officers were making an attempt for
taking punishment measures on oil mafia.

However, the punishment to the people who involved in the adulteration was nominal
and black market playing major role in fuel mix and diversion. Imprisonment of oil
mafia who involved in the adulteration was not serious and political parties were
giving guarantee to the respective people for getting bail from the courts.

Conclusions and Policy Recommendations

As discussed in the previous sections, the major issues to be addressed for curbing
of PDS kerosene diversion and adulteration and also tackling oil mafia was mainly
depends on opening up of kerosene open market system, strict measures for curbing
of un-authorised ration cards, less price variation between PDS kerosene and open
market kerosene, opening of more CNG gas bunks with un-employed youth,
streamlining of bunks allocated to the political back-up families, allocation of enough
kerosene to petty vendors and finally rationalisation of imported crude oil price and
retail selling of petroleum products and by products in the country. However, the

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 This Paper written based on the policy report prepared on Channelization of Kerosene Distribution in Andhra Pradesh and also the Recent Increase of Oil-
Mafia and Killing of Innocent Regulating Officers

petrol and diesel prices were increasing drastically since few years and central
government was intentionally charging more price in the form of taxes and duties.
Though the automobile companies were introducing time to time new technology
vehicle for helping of customers in fuel conservation and more mileage but still there
no rational model for rising of diesel and petrol prices in the country.

Mafia role was rampant when politicians can motivate the un-employed youth for
earning easy money and it was evident in case of real-estate, film making, drugs,
prostitution, adulteration of kerosene in petrol bunks, fake currency printing and other
allied activities. Parallelly the availability of LPG in several villages was increased
drastically since last 10 years and very few families depending on kerosene for
cooking their food and there was a need of time to time assessment of customer /
consumer utilisation of various fuels for curbing kerosene allocation to the ration
shop diverting kerosene for adulteration.