Wednesday, June 3, 2009

Fuel price increase on hold

The government has paid GH¢7 million to the National Petroleum Authority (NPA) to absorb projected increases in fuel prices for the period May 15 to May 31, this year.It is also in the process of paying another GH¢10 million to cover under-recoveries accumulated since the last price adjustment and forestall any panic on the market.This is in addition to GH¢145 million ($I06 million) the government had paid to the regulatory body to reduce the debt inherited from past subsidies in prices.Reacting to speculations over imminent rice hikes which hit the fuel market this week, leading to some panic buying and rumours of shortage, the Deputy Minister of Energy, Dr Kwabena Donkor, said rue subsidies would not be a permanent feature of the government.He said there ought to be other option because in a cost-and-benefit analysis of the absorption of increases in fuel prices the funds being expended in cushioning fuel increases could be used in providing infrastructure for schools and other social services.He said even if the country had the resources, that option was not the best adding, however, that the current intention to absorb prices was within the context of the inefficient pricing formula being used currently to peg levies and taxes on fuel.He said while the government endeavoured to fix the inefficiency in the pricing formula to keep prices low, it was needful to cushion the public, particularly the vulnerable.He said to make up for the funds being used in under-recoveries of fuel levies, the government was pursuing a number of options, including the fixed contract agreements with oil producing countries, steps to clear the inherited arrears of past under-recoveries and the directive to the NPA to take a second look at the pricing formula to weed out any inefficiency.In addition, the ban on the importation of old cars or cars that had been used for more than 10 years which had poor efficiency in fuel consumption was going to be enforced, along with other measures, to ensure more efficient use of fuel in the county.The minister said proposals had also been made for a mass railway transportation system for the capital as another of the initiatives to lessen dependence on fossil fuels in the country as well as the full implementation of the mass transportation project.Dr Donkor said if the Tema Oil Refinery (TOR) Debt Recovery Levy had in the past been applied for the purposes for which it was established, the principal and interest would have been fully paid by the end of last year.The government was, therefore, taking steps to ensure that the levy was applied as required under the enabling legislation.He reiterated the government’s commitment to recoup any payments made in the absorption of fuel prices by an efficient tax system and expanding the tax bracket so that all would contribute and reduce the tax burden on only a few.Dispelling rumours that the country had run out of stocks of crude, Dr Donkor said those peddling the rumours failed to realise that the ball game had changed in the energy sector.He said the situation now was that bulk oil distributors apart from TOR, had stocks with enough gas oil stocks in Buipe for the whole of the northern sector.He said with the decentralised distribution system, other individual bulk oil storage distributors were being relied on instead of relying solely on TOR as was the case in the past.Meanwhile, consultations between the government and other stakeholders are still ongoing for the government to decide on whether to absorb fuel price increases or not.
Source:Daily Graphic

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