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Philippines solicits bids for fuel marking program

The Philippine Department of Budget and Management’s Procurement Service and the Bureau of Customs (BOC) have 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 Philippine government established the fuel-marking program to recover about PHP 27 billion (USD 510 million) in annual revenues being lost from oil smuggling.

Pegged at PHP 0.08 per liter over a five-year period, the five-year contract will be subject to an annual performance review.

The winning bidder will 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 conduct tests including fuel analysis and data management nationwide.

The government will choose a maximum of five prospective bidders this month, who will be ranked according to their track record in implementing a fuel marking program, the qualification of their personnel and their current workload relative to capacity.

The contract cost for the first year could reach up to PHP 1.96 billion (USD 37 million) in case of over performance in the actual volume of fuel marked, which will be funded by the national budget.  The budget for the second to the fifth year of the fuel marking program, including field testing operations, will come from a trust fund to be established under the TRAIN Law.

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

Based on Philippine Department of Finance estimates, revenue losses from excise taxes and value-added taxes due to oil smuggling and misdeclaration reached PHP 26.9 billion (USD 508 million) in 2016, almost half of the actual PHP 52.6 billion (USD 994 million) collected by the BOC and the Bureau of Internal Revenue (BIR).

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

The Manila-based Asian Development Bank had a higher estimate of PHP 37.5 billion (USD 709 million) in foregone tax revenues yearly from oil smuggling, while another study commissioned by the domestic oil industry pegged revenue losses at PHP 43.8 billion (USD 828 million) yearly.

The fuel marking program is seen as paving 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.