Average fuel prices per litre

Ireland diesel: 75 cents (45p) Ireland unleaded: 81 cents (49p) UK unleaded: 70p UK diesel: 75p Source: AA

Financial secretary to the Treasury Paul Boateng said customs officers had been doing much in Northern Ireland to tackle the problem since the figures were first published last year.

But he told BBC Radio 4's Today programme it was "not just a customs issue", but a matter of persuading people to resist the organised criminal groups who smuggle the fuel over the border and offer it to garage owners.

"It's about developing in Northern Ireland a culture of compliance, a culture of normality," he said.

Lower taxes

BBC correspondent Kevin Connolly said anyone living within 30 miles of the border crossed over to the south to buy fuel.

Lower tax meant it cost him about �32 to fill his tank with diesel south of the border, rather than �49 in the north. Exchange rates with the euro had also had an effect.

NI petrol stations

700 in total 450 selling some illegal fuel 250 selling only illegal fuel Source: National Audit Office

Patrick Kelly, who runs a petrol station near the border town of Strabane, told the BBC it was almost impossible to run a legitimate petrol station in some parts of Northern Ireland.

"Nobody in their right mind is buying fuel at Northern prices, and not availing themselves of cheaper fuel over the border. You can't do it, you just can't do it."

Gregory Campbell, Democratic Unionist MP for East Londonderry, said republican paramilitary groups were involved in fuel smuggling.

"They have the logistical capabilities, they have the manpower to smuggle large amounts of fuel... it's a very, very profitable exercise for them."

Diesel laundering

Mr Boateng said the number of officers investigating fuel fraud in Northern Ireland had risen from 25 to more than 160 since April 2000.

Nobody in their right mind is buying fuel at Northern prices, and not availing themselves of cheaper fuel over the border

Patrick Kelly, Strabane

This has resulted in twice as much fuel and three times as many vehicles being seized as previously, he said.

There had also been a crackdown on diesel "laundering" plants, where duty-rebated "red" diesel for off-road farm vehicles is turned green for on-road use.

The Audit Office said these were much more prevalent in Northern Ireland than in the rest of the UK.

Mr Boating said customs had broken up 17 commercial organisations involved in diesel laundering.

The Audit Office suggests that Customs and Excise should consider chemically marking legal petrol and diesel to deter smuggling and laundering operations.