The State of São Paulo, 18/04/2005

The promptness with which the São Paulo authorities acted to create an effective legal instrument to curb the sale of adulterated fuel in the State of São Paulo renews hopes, which were lost, that the fight against this harmful practice to consumers, to honest businessmen and the Treasury will finally produce important results.

Until now, even when, in specially planned operations, such as those carried out by the state government, it was found that some establishments acted illegally, there was no punishment in practice. The temporary interdiction of the establishment determined by the inspectors was not enforced, as the inspection team had to go to another establishment to make everything work as before.

Less than four months after sending the proposal to the Legislative Assembly, Governor Geraldo Alckmin sanctioned, on Tuesday, the bill that authorizes the cancellation of registration in the register of taxpayers of the Tax on Circulation of Goods and Services (ICMS) ) of the establishment that acquires, distributes, transports, stores or resells oil products, natural gas, alcohol and other adulterated fuels.

For months, the São Paulo government, through joint actions carried out by the Secretariats of Finance and Public Security, has been inspecting gas stations in different parts of the State of São Paulo, which accounts for about 40% of national fuel consumption. More than half of the inspected establishments presented some type of irregularity. The main one was the mixture of alcohol with gasoline at a higher level than allowed and solvents. In some samples collected during these operations and analyzed by the Institute for Technological Research (IPT), gasoline represented only 30% of the volume.

When refueling his vehicle, the consumer is unable to know whether he is buying adulterated fuel or not. In most cases, you will not even realize you have been duped. But it will bear certain damage. The vehicle will yield less - with the same amount of fuel, travel a shorter distance - and the engine will be damaged. Injector system, plugs and valves are the most affected points. The extent of the damage will depend on how often you fill the vehicle with adulterated fuel.

Honest traders also lose in this dirty war. They collect all taxes due (from the final price of gasoline, 60% correspond to taxes), obtain a small margin per liter sold and have no way to compete with dishonest traders. The cost of the solvent is less than that of gasoline and, in addition, it is less taxed. In this way, fraudsters can sell at a price lower than that practiced by an honest competitor, and with a higher profit margin.

It also loses the government. It is estimated that fraud - in addition to fuel adulteration, there is also tax evasion, sometimes with the connivance and cooperation of members of the Judiciary - cause annual losses of R $ 5 billion in tax collection in the country. In São Paulo, the Finance Secretariat estimates losses at R $ 500 million per year.

The task of inspecting the stations and the quality of the product they sell is the responsibility of the National Petroleum Agency (ANP). But this body has only 51 inspectors to control 428 distribution bases and around 30 thousand gas stations across the country. The possibility of an establishment operating under irregular conditions to be caught by this inspection is practically nil.

Now, with the law sanctioned by Governor Alckmin, and which will begin to be applied as soon as the Secretariat of Finance issues a specific ordinance, the situation changes. Any distribution, transportation or sale company that deals with adulterated fuel will not be able to function again. And its owner will not be able to work for five years in the industry or apply for a new company to develop the same activity.

Two other projects dealing with this matter were sent by Governor Alckmin to the Legislative Assembly. One of them determines the confiscation of irregular fuel, which will then be reprocessed for use by the police, and another prevents the irregular use of solvents. They will certainly contribute to moralize the fuel market in São Paulo.