DRI sleuths have busted a racket in smuggling Rs 17.7 crore worth diesel from Dubai, imported as 'mineral spirit' by some city-based companies.

The 'mineral spirit' was seized at Chennai Port on April 17 by Directorate of Revenue Intelligence officials during searches in Tamil Nadu and Andhra Pradesh, an official release said.

A total of 263.78 metric tonnes (about three lakh litres) of diesel was found concealed in 14 containers at the Port under the name 'Mineral Spirit'.

Diesel is a restricted commodity for import as per the Foreign Trade Policy and can be imported by Oil Marketing Companies. To evade the restriction, operators have been importing diesel under the guise of mineral spirit, DRI investigations revealed.

The city-based operators also declared much "lower value" of the total consignment to evade customs duty, the release said. After import, the diesel would be taken to grey markets in Chennai, Ongole, Kakinada and parts of Telangana for distribution.

The operators created fake companies in Dubai to purchase and import diesel to Chennai by creating 'false documents' and 'invoices'. The difference in price was adjusted by payments made through "hawala channels", the release said.

Five persons, including the key suspect, have been arrested in this connection under the Customs Act, 1962, the release added.