Government investigators looking into a sudden surge in exports from India to Bahamas are all set to conclude the numbers are not dodgy, which could result in Reliance Industries Ltd, whose name had cropped up as the reason for the startling discrepancy in the trade figures of the two countries, getting a clean chit.
A preliminary report by the Directorate of Revenue Intelligence (DRI) and the Directorate of Central Excise Intelligence, which had been ordered by the finance ministry to investigate the mismatch in data, has concluded that it is not because of any scam and can be explained by the peculiarities of oil trading.
"All is well... The preliminary enquiry has found nothing wrong with the export data or exports," a finance ministry official told ET. Indian exports to Bahamas, as per official data, vaulted to $2.2 billion in 2010/11 from $2.2 million in 2008-09. But this steep jump did not stack up against Bahamas' total imports figures of $2.8 billion in 2010, setting off alarm bells about possible money laundering and prompting the finance ministry to order an investigation.
The case had all the markings of a scam - a sudden and steep jump in exports, the use of a tax haven and a mismatch in data of the two countries. Some trade experts had suspected whether these exports, showing up only in Indian trade data, had been made by sham companies only to bring back black money stashed away overseas to India following intense global pressure on tax havens to reveal information on tax offenders.
But the report of the DRI and the Directorate of Central Excise Intelligence says the real reason is much more prosaic. It says the mismatch in data arose largely because Bahamas trade department excludes goods trans-shipped using its territory from its import data calculations as the country is not the final destination for these goods.
Reliance exports petroleum products meant for the North American and South American market to Bahamas where it has storage facilities. But because these products are not used in Bahamas, that country does not account for it in its import data, although India accounts it in its export figures.
The finding of the government investigators is in line with what company and industry officials have been maintaining. The numbers match Reliance's shipment to its Bahamas tanks, which also rose to $2.2 billion in 2010-11 from virtually nothing in 2008-09. Reliance started using the tanks in Bahamas in 2009-10, when it shipped gasoline worth $631 million. Only a small fraction of this shipment is used locally in the Caribbean region and the fuel is often directly loaded on to smaller ships and shipped to the North and South American markets. The company, which receives payments for the exports from customers in the US or South America, has hired fuel tanks in the Bahamas because of the prospect of huge savings in shipping costs by using large tankers to ship fuel to the strategically located country. The strategy allows the company to avoid using the relatively costly smaller vessels except for last-mile delivery to the final destination.
Storing fuel in large tanks near the key markets also helps Reliance respond quickly to customer demands and maintain supplies if there are supply disruptions due to weather or other reasons. The use of strategically located storage tanks to feed key markets is standard practice in the international oil trade. Reliance has hired large tanks in Singapore, East Africa, Israel and Rotterdam, besides the Bahamas, as part of its global fuel sales strategy for its new refinery in Jamnagar, which is obliged to export its entire output as it has been set under the Special Economic Zone or SEZ Act. Bahamas storage tanks are used for "bulk breaking" of large cargoes and exporting smaller parcels to the North American and Latin American markets.
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