Govt seeks solutions to end erratic fuel price hikes
The government is hopeful that it will soon find a longterm solution to the erratic increase in the prices of products in the country
It has, however, put in place a number of measures to ensure that prices in petroleum products do not rise rapidly to the disadvantage of the ordinary consumer.
One of such measures, the Minister of Energy, Mr Peter Amewu, mentioned at a press conference on September 20 in Accra, was to secure a government-to-government (G2G) oil supply arrangement to address the supply side factors of petroleum product prices.
“We are optimistic that this and other measures put in place by the government in collaboration with Ghana Oil Company Limited (GOIL) will in a short to long term, begin to stabilise petroleum products in the foreseeable future,” he said.
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Beyond that, he noted that the government had since last year reduced the Price Stabilisation and Recovery Levy (PSRL) and the Excise Duty to cushion consumers.
These interventions alone, he said, had resulted in revenue losses of GH¢232 million to the state between December 2017 and June 2018.
“The revenue loss to on the removal of the Excise Duty and the reductions of the PSRL alone between December 2017 and June 2018 amounts to over GH¢232 million,” he said.
Currently, the PSRL has been reduced from GHp12 per litre to zero for petrol, GHp10 per litre to zero for diesel and GHp10 per kilogramme to GHp3 per kilogramme for LPG.
Already, the minister explained that the government had used tax interventions to mitigate the impact of domestic petroleum product price increases.
Again various tax interventions such as the reduction of the Special Petroleum Tax rate from 17.5 per cent to 15 per cent, decline of the Special Petroleum Tax rate from 15 per cent to 13 per cent, and the conversion of the Special Petroleum Tax from Advalorem to Specific Tax are being implemented by the government since last year.
He maintained that due to the government tax interventions, the current prices of both petrol and diesel were selling at GH¢5.12 per litre.
The prices for the previous windows were GH¢4.90 for petrol and GH¢4.94 for diesel. This represents a change in price from the previous window by 4.49 per cent for petrol and 3.64 per cent for diesel.
Impact of interventions
Without intervention, Mr Amewu indicated that prices would have been GH¢5.54 for petrol and GH¢5.51 for diesel. This would have led to a 13 per cent increase in the price of petrol and per cent increase in the price of diesel.
As a result, he said, petrol was nine per cent less expensive than it should have been without the interventions. Diesel was eight per cent less expensive than it would have been without government’s intervention.
“The significance of the government tax reduction could be judged from the fact that the total component of taxes, levies and margins in the ex-pump prices of petroleum products reduced from 40 per cent in March 2017 after the government came into office to a current 26 per cent.
“Notwithstanding these interventions, the international market conditions have weighed strongly against domestic prices of petroleum products as international crude oil prices continue to increase and currently estimated at US$78 per barrel,” the minister stated.
But, some experts, including the former Deputy Minister of Power, Mr John Jinapor, has taken a swipe at the government for patting itself at the back for reducing the PSRL, for instance.
“When the world market price fell from US$100 to US$40 per barrel, it meant that on each barrel of oil, the country exports it lost US$60 and so, in this scenario the economy was on the verge of collapse ”It was the reason behind the introduction of the PSRL when the previous government was in office to cushion the state in order not to affect the economy.
So today that price per barrel is hovering around US$75, have no option than to reduce that levy,” he said.
He quizzed why the government did not remove the entire PSRL if it had a good motive to ensure that the ordinary consumer did not suffer at the end. — GB