Subsidizing petroleum products continuously is killing- Industry players cry

Petroleum Products
Ivy Apea, Board Chairperson, CBOD.

By: Mabel Adorkor Annang

Industry players in the downstream petroleum sector say subsidizing prices of petroleum products to provide value for money for consumers is putting pressure on their finances.

They point to the galloping dollar against the Cedi and the Bank of Ghana’s inability to provide forex for Bulk Distributing Companies, BDCs to purchase petroleum products as pushing the consistent increase in prices.

The price deregulation policy was introduced by government in 2015 to allow marketers and importers of petroleum products to directly set their own prices based on import parity costs, taxes and margins.

It brought an end to government subsidies on these products, which arises from exchange rate losses and consumer subsidies. After six years of operating the deregulation policy, it has not been reviewed to determine its positive or negative effect on the downstream petroleum industry and the economy as a whole.

These concerns raised by the energy sector CSOs and stakeholders have necessitated a policy review by the National Petroleum Authority.

A 12-member committee with representatives from the Ministry of Energy, the Chamber of Bulk Oil Distributors, CBOD, the Association of Oil Marketing Companies, the LPG Marketing Companies, and the NPA was set to proffer the review.

Petroleum Products
Ivy Apea, Board Chairperson, CBOD.

During a Price Deregulation Policy Review Stakeholder Forum in Accra, Board Chairperson, CBOD Ivy Apea said under the current structure, BDCs are subsidizing heavily for consumers thus the need for the review of the policy.

“The subsidies are killing, we currently have a situation, for example you sit here today you sold something and collected 10 million Cedis. You are supposed to change that 10 million Cedis when the rate was 10 Cedis. The rate now is 16 Cedis. You’ve already collected the money, it is not like somebody owes you. Now that you are ready to pay the money you are no longer going to get the dollars you need to be able to settle the bill. How do we solve that problem and most importantly is there a way government can subsidize the loss, given a particular period of time.” Mrs. Apea added.

Chief Executive of the Association of Oil Marketing Companies, Kweku Agyemang-Duah said the pressure from the galloping dollar has forced some OMCs to no longer wait for the next pricing which is 30 October to increase the prices at the pumps.

“I don’t think it will be prudent to be sitting down waiting for another two weeks to change the figures, it is not going to work. If we continue like this, I bet you, we will not see December.

Mr. Agyemang-Duah hinted that some of the OMCs may fold up if nothing is done immediately about the current situation.

“A lot of us will have to close down because it’s pretty difficult. I heard some of the OMCs have responded to the call, the call to react to the FX. I know drivers will not be happy” He lamented.

Head of Pricing at NPA Abass Tasunti said the Price Deregulation Policy review will address the current challenges in the downstream Petroleum sector.

“Times have changed and it is important to amend the policy to serve the purpose. I think we need to reiterate the point that the purpose of the committee was not to reverse the Price Deregulation Policy. Everyone on the Committee agrees that the price deregulation policy is a good one. We only need to make it better to serve the industry better.” Mr. Tasunti explains.

Efficient transparent market, how to deal with the consistent increase in prices at the pumps due to the galloping dollar and the review of some aspects of the Price Deregulation Policy were some recommendations made by CSOs and Stakeholders during the forum.

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