The argument of subsidies on petroleum products has been politicized over the years and this is deeply cutting the development progress of the nation Ghana.
Almost all political parties in Ghana are guilty of politicizing issues of petroleum products pricing.
The time has come for Ghanaians to divorce politics from the issues concerning petroleum products.
Subsidies on petroleum products have largely come to take away development from the people. Subsidies on fuel has also (to an extent) accounted for the millions of Ghana cedis debt hanging on the neck of the Tema Oil Refinery (TOR).
First of all the argument that government is not subsidizing petroleum products is a moot one.
The last time Ghana experienced an upward adjustment of fuel prices was in December 2011 when a 15% increment was introduced on Petrol and Diesel. At the time, the exchange rate was GH¢1.54 changing for $1.00. The rate is now GH¢1.90 changing for $1.00. Somebody must have paid for the difference; obviously not the cross-subsidy levy. There is simply no case in the argument of no subsidy.
A subsidy generally is targeted to benefit the vulnerable but I dare say the fuel subsidies rather take development from the poor.
Fuel prices in Ghana are among the lowest in West Africa and this has necessitated smuggling of Ghanaian fuel to neighboring countries. The security agencies are up to task and dealing with the smuggling lately and they must be encouraged and commended for keeping our borders tight.
But why must we give incentives for smuggling through subsidies only to turn round and deal with the problem? We must discourage the smuggling of fuel in the first place by removing subsidies!
The National Petroleum Authority (NPA) which has the mandate to oversee and monitor activities in the petroleum downstream industry must be bold to argue against government subsidies on petroleum products.
The way forward >>>
Consumers of Liquefied Petroleum Gas (LPG), Kerosene, Premium Gasoline (Petrol), Gas oil (Diesel) and other products must be encouraged to pay realistic prices.
The cross-subsidy levy should be outlawed or re-designed for other purposes.
Liquefied Petroleum Gas (LPG)
The consumption of LPG in Ghana has increased substantially over the last decade. Available data suggests that the total consumption of LPG in 1999 was 44,000 tonnes. This had increased to 265,000 tonnes in 2012 representing an increase of about 500% over the period. It is even estimated that LPG consumption demand would hit a record high of about 600,000 tonnes in 2022.
LPG has been subsidized for several years and its strong growth in consumption reflects this. Subsidy on LPG has rather served as incentive for commercial vehicle operators to the detriment of household users.
The elimination of subsidy on LPG would be a good signal for our economy.
- There would be a decline in Taxis and other commercial Vehicle Operators in converting from Petrol to LPG. There may even be conversions back to Petrol particularly if the vehicle has not been formally and safely converted using a proper fixed tank and other prescribed appurtenances. It would even save potential operators the initial cost of converting from Petrol to LPG.
- There would also be an elimination of supply shortages of LPG. If commercial vehicles are discouraged from the use of LPG by the removal of subsidies, there would be a corresponding increase to supplies to the household market.
However the negative effect on household users of LPG by the removal of subsidies cannot be ignored. Household use of LPG will carry on but at a lower growth and penetration.
Government must therefore as a matter of priority launch a project to encourage household usage of LPG by distributing free cylinders filled with LPG to poor homes. Consumers would like and adjust once they have been accustomed to it and secured the appropriate appliances even if it is fully priced at International parity levels.
Kerosene
Unlike LPG, the consumption of Kerosene has reduced drastically over the years. Statistics available indicates that the consumption of Kerosene between 1999 and 2012 has recorded a negative growth.
The total consumption has decreased from 158,000m3 in 1999 to 57,000m3 in 2012. This translates to about 63% decline.
In the case of Kerosene, it is mainly used for illumination in rural households and is in decline due to a combination of two (2) factors; penetration of rural electrification extension to rural areas and the rural – urban drift.
Experts have argued that the smuggling of Kerosene is on the high side because it has similar flash points with diesel. This they say allow for smugglers to mix cheap Kerosene with diesel for sale. There is the fear that if subsidies on Kerosene are not removed, smugglers would devise other means of smuggling notwithstanding the efforts by our security agencies. It is estimated that Kerosene consumption demand would decline by a paltry 5,000m3 in ten (10) years from now. The Kerosene consumption demand forecast gives an indication that no matter the intensive extension of rural electrification and the rural – urban drift, Kerosene would still be heavily consumed – by people who use it for other means; smuggling.
Subsidies on Kerosene should be gradually removed whilst government increases the pace of rural electrification.
The users of Petrol and Diesel should also bear the full cost of the products they use. This would give governments a free hand and options to advance the development of this country.
In the spirit of paying for realistic prices of fuel products, the TOR Debt Recovery Levy must be properly accounted for and if possible outlawed when the Debt of TOR has been dealt with.
There must be a possible elimination of fuel subsidies and I wait to be convinced as to why government should continue to subsidize fuel products!
Brogya Genfi – Kumasi
BROGYA GENFI 