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Use GH¢948m PSRL cash to cushion fuel prices – ACEP

The Africa Centre for Energy Policy (ACEP) wants government to utilise an estimated balance of GH¢948 million in the Price Stabilization and Recovery Levy (PSRL) to cushion consumers of petroleum products against rising pump prices.

Established under the Energy Sector Levies Act, 2015 (Act 899), the PSRL is to serve as a buffer for under recoveries in the petroleum sector, stabilize petroleum prices for consumers and subsidize premix and residual fuel oil.

“For policy credibility, the utilization of the accumulated balance is what is required to cushion consumers in this high oil price period,” it said in a statement signed by its Executive Director, Benjamin Boakye.

The proposal comes on the back of a recent decision by the National Petroleum Authority (NPA) to exempt consumers of petrol, diesel and liquefied petroleum gas (LPG) from paying levies on the three products for two months, though it is yet to take effect.

Consumers currently pay 16 pesewas per liter (GHp16/Lt) on petrol, 14 pesewas per litre (GHp14/Lt) on diesel, and 14 pesewas per kilogram (GHp14/Kg) on LPG as levies.

Prices of crude oil and refined petroleum products have seen sharp increases on the world market due to a rise in demand of oil globally without a corresponding increase in supply, particularly from the Organisation of Petroleum Exporting Countries (OPEC) and its allies.

However, ACEP argues that simply zero-rating the PSRL for two months creates the assumption that government does not intend to activate the price stabilization purpose of the PSRL, thus raising the fundamental accountability question of what government intends to use the estimated balance of GH¢948 million in the PSRL account for.

“It is important to highlight those consumers of petroleum products in a deregulated market are price takers. They do not control the three key variables that significantly influence petroleum prices in Ghana; global crude oil prices, the foreign exchange rate and the taxes and levies imposed on petroleum products.

Therefore, if there is a policy for consumers to pay a levy to assuage their pain in a high oil price regime, the least the caretaker of the levy could do is to preserve the credibility of the levy.  Unfortunately, the opposite appears to be the case,” the statement noted.

In the current escalating price regime, the policy think-tank said the application of the PSRL for its legally established purpose is an easier and more responsive approach to cushion consumers than what is proposed by NPA.

Moreover, the application of the levy as established by law does not require Parliamentary approval. Therefore, it questions why the NPA prefers that citizens wait for Parliament (currently in recess) to grant a two-month suspension of the PSRL when there is accumulated cash to assuage the suffering of the consumers immediately.

The prices of a litre of petroleum products have increased by about 33 percent this year and ACEP said the increments have introduced significant cost burden for the productive sector and the average Ghanaian.

Addressing this, it explained, will require pragmatic interventions from the government which goes beyond the PSRL.

Need for holistic review

The rising global prices of crude oil and its concomitant effect on businesses, ACEP noted, calls for a holistic review of the downstream price mechanics.

It said this could be achieved through the dual regulatory spectrums; taxes and levies from the government, margins and market failure on the part of the NPA, the industry’s regulator.

Petroleum products have become the easiest avenue to tax within the last decade, with the periodic introduction of new taxes and upward adjustment of existing ones. The practice, however, ACEP argues, ignores the context of a country without an efficient social intervention for transportation. As a result, it noted, petroleum taxes impose a regressive burden on the average Ghanaian.

“On the part of the NPA, there are impositions of margins that have outlived their usefulness; the BOST margin, Fuel Marking margin and Unified Petroleum Price Fund (UPPF) margin. The worst part is that the collection of the margins and levies has not been optimal, leading to losses from theft by some OMCs in excess of GHS1billion annually,” he said.

It further recommended to government to ensure that GRA improves the efficiency of revenue collection from the levies to allow for their reduction to further cushion consumers.

Again, it adds that government should take steps to review the margins, taxes, and levies regime for petroleum products to eliminate those that have outlived their usefulness.

 

Estimated Revenues Accruing from the SPRL (2016-2021)

2016 – 2021*

 

Full Value Estimation (GHS) 25% Adj. for non-collection/OMC theft

(GHS)

Estimated Total Collection 2,527,856,959.38              1,895,892,719.54
o/w 50% for subsidies  1,263,928,479.69                 947,946,359.77
Balance for PSRL Account 1,263,928,479.69                 947,946,359.77 

*2021 data is based on half year product consumption (Jan-June)

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