The Ghana National Petroleum Authority (NPA) has confirmed that the country has implemented controversial regulatory measures, including the removal of fuel subsidy to ensure stability across its downstream sector.
The Authority said the removal of the subsidy is part of the country’s implemented regulatory measures to ensure stability across its downstream sector.
Chief executive officer of NPA, Mr. Abdul Hamid, dropped the hint during a presentation at the ongoing Africa Refiners and Distributers week 2023, in Cape Town, South Africa.
“We have removed subsidies and deregulated our markets. Industries were shutting down because the government was finding it hard to find the money to provide subsidies and to this day industry is being powered by investments in the private sector and there are no complaints of supply.
“We are ensuring affordability and security for the vulnerable consumers through the removal of energy subsidies,” he said while speaking on more reforms implemented in the NPA,” he said
According to Hamid, “the Ghanaian government has eliminated energy subsidies through the NPA.”
He disclosed the plans were implemented in response to the global oil and gas market volatility caused by the Russian-Ukraine war and energy transition-related policies.
“For the first time in 30 years, we have installed fuel caps as a measure to intervene and to control market instability,” he disclosed.
Hamid added that the NPA has also created a special fund to assist refineries in boosting Ghana’s production capacity to 50 barrels of oil in order to meet the country’s growing internal demand.
Hamid explained further that the removal of subsidies and deregulation of the markets have led to more investment in the private sector, which has in turn boosted the industry, resulting in a more stable market without supply complaints.
The NPA told the audience that before now the Ghanaian government’s inability to provide subsidies led to industries shutting down.
“These plans were put in place in response to global oil and petrol market volatility caused by the Russian-Ukraine war and energy transition He added that “the NPA is now ensuring affordability and security for vulnerable consumers through the removal of energy subsidies.
“This is part of the reforms implemented by the NPA to improve policies.”
To further justify its actions, the National Petroleum Authority (NPA) called a press conference in Accra yesterday stressing that the subsidy on Residual Fuel Oil [RFO] had become unsustainable because the subsidy on it was affecting its supply.
It explained that the suspension of the subsidy was to ensure regular supply of the product to the industry, since the high price of fuel and the continuous depreciation of the Cedi against the dollar have made it unsustainable to keep the subsidy on RFO.
The press conference was addressed by the head of economic regulation of NPA, Mr. Abass Ibrahim Tasunti. He said the revenue the country was generating from the Price Stabilization and Recovery Levy had not been enough to pay for the subsidies accruing from RFO and premix fuel.
“The suppliers of this product (RFO) are refusing to supply because the subsidies are not being paid on time. Also, because the subsidies are not being paid on time, the companies have refused to supply the product.
“They sell and they are not recovering the full cost, and they are also not getting the subsidies paid to them,” he said.
The government paid GHc136 million as a subsidy on RFO in 2021 and again paid GHc52 million out of the total subsidy of GHc154 million for the period January to September 2022, leaving a balance of GHC102 million.
He said the NPA had engaged players in the manufacturing sector on the challenge in the supply of RFO and the resolution was that in the meantime, the subsidy on RFO should be removed so that they could pay the full cost to ensure regular supply of the product and get their factories running.
“The industry prefers to pay the full cost of RFO, so they can continue running their factories than not to have their products at all,” Mr. Tasunti said.
He said the alternative product that the manufacturing industry could use was diesel but the cost of the product was very high now.
When the Price Regulation Policy was introduced in July 2015, the government decided to keep subsidies on RFO and premix fuel.
And to ensure that these subsidies are funded, the Energy Sector Levies Act introduced a levy called the Price Stabilization and Recovery Levy to pay for subsidies on RFO and premix.
Mr. Tasunti said the revenue that would be generated from the Price Stabilization and Recovery Levy would be focused on only premix fuel for now, while the subsidy on RFO would be taken off until things change.
However, the government through the NPA has suspended the subsidy on Residual Fuel Oil (RFO), the fuel used by the manufacturing sector, effective November 1, 2022.
By Ken Okoye