Government cannot subsidize petroleum prices – NPA explains

Government cannot subsidize petroleum prices – NPA explains

The volatile variables which are accounting for the upward adjustment in fuel prices in the country currently according to Mr Abass Tasunti, Head of Economic Regulation at the National Petroleum Authority are the world market prices and the exchange rate.

In getting Ghanaians to appreciate the gravity of the situation, Mr Tasunti said on TV3 that “with regards to the world market prices when you compared what pricing was used for petrol in the just ended window on 15th October 2022 to that of the new pricing window which started on 16th October 2022 you will realize that price of petrol has been increased by 16% on the world market. For diesel, it was increased by 10%, combined with the depreciation of the cedi is what has led to changes at the pump in this window”.

Regarding constant calls by Ghanaians for the government to scrap some taxes, Mr Tasunti said “I am sure you will recall there were some discussions on the removal of some taxes from the petroleum price build-up. The only levy that can be used to cushion Ghanaians is the price stabilization and recovery levy which was used in November and December 2021 and also January this year.

“We recommended that government should scrap it for some time but we have made it known as well that the said levy is used as subsidies on premix fuel and the subsidies also keep rising due to the depreciation of the cedi and this is to cushion for premix fuel and the residual fuel oil for the manufacturing sector. So this levy cannot be used now and we cannot recommend it now because the one we collected has not been revised upwards and is still inadequate to pay for the subsidy so we cannot at the moment for anything to be done about it.” 

He then added that “with regards to the other taxes like I mentioned, government after several discussions and options available showed it was not feasible to scrap these taxes because of the budgetary constraints government has to deal with and therefore we cannot make any realistic request for it to be scrapped”.

Explaining further why it would be difficult for Ghanaians to get some cushioning from the price hikes Mr Tasunti said “the NPA as regulator acts as a referee. We license companies to procure petroleum products and they make them available for us to consume…unavailability of the product will lead to a challenge in the economy and therefore we must always strike the balance.

“Availability and pricing as we speak, some of the products are already subsidized and inability to pay will lead to shortage because the supplier needs to recover his investment to keep supplying. So as a regulator calls for subsidies have to be looked at in the sense that can government afford the subsidies if yes we would not bother our heads but we have a history to show that government subsidizes they really find it difficult to pay and they could lead to shortages in petroleum products.

“The prices are rising and have impacted the economy but if the products are not available you will realize there will be black markets, there will be queues and we might end up paying more for the product due to shortages. As a regulator, we have to ensure that with the formula used to set the pricing, the supplier is recovering their cost in order to supply products to us. Any threat to supply will be a major problem as there will be no fuel and we will not want to find ourselves in that space,” Mr Tasunti concluded.

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