Abass Ibrahim Tasunti
GOVERNMENT HAS suspended the subsidy on Residual Fuel Oil (RFO) until further notice, the National Petroleum Authority (NPA) has announced.
The action, which took effect on November 1, 2022, follows a directive from the Ministry of Energy to ease the financial burden on the Price Stabilisation and Recovery Account (PSRA), temporarily.
The NPA, in a letter informing industry players of the suspension of the policy, said the directive took into consideration the growing concern about the sustainability of the account, to meet under-recovery payment obligations for Premix Fuel and RFO.
“The NPA will continue to compute and announce the price build-up (PBU) of RFO for each pricing window, as it has always done to the industry,” said NPA Chief Executive, Dr. Mustapha Abdul-Hamid.
Fuel prices have shot up in recent times, with Oil Marketing Companies (OMCs) displaying new prices for petroleum products at their pumps this week.
Petrol now costs GH¢17.99 per litre from GH¢14.99 previously while diesel is selling at GH¢23.49 per litre from GH¢17.99.
Analysts have attributed the fall in the value of the local currency against the US dollar and other major trading currencies to the rise in fuel prices.
The cascading effects of fuel hikes has translated into hikes in the transportation of both individuals and food items.
However, the NPA said the suspension of the subsidy on RFO was to ensure regular supply of the product to industry since the high price of fuel and the continuous depreciation of the cedi against the dollar have made it unsustainable to keep the subsidy on RFO.
At a press conference in Accra Wednesday, Head of Economic Regulation of NPA, Abass Ibrahim Tasunti, said the revenue the country was generating from the Price Stabilisation and Recovery Levy had not been enough to pay for the subsidies accruing from RFO and premix fuel.
He stressed that as the prices of fuel and the exchange rate rose, subsidy levels also rose because the full costs of the products were not being passed onto the consumer.
“The suppliers of this product RFO are refusing to supply because the subsidies are not being paid on time. Also, because the subsidies are not being paid on time, the companies have refused to supply the product. They sell and they are not recovering the full cost, and they are also not getting the subsidies paid to them,” he said.
The government paid GH¢136 million as subsidy on RFO in 2021, and also paid GH¢52 million out of the total subsidy of GH¢154 million for the period January to September, 2022, leaving a balance of GH¢102 million.
Mr. Tasunti said the manufacturing industry had suffered to access RFO to power their machines, leading to the close down of some factories.
He said the NPA engaged players in the manufacturing sector on the challenge in the supply of RFO hence the resolution.
He said the alternative product that the manufacturing industry could use was diesel but the cost of the product was very high now.
When the Price Regulation Policy was introduced in July, 2015, government decided to keep subsidies on RFO and premix fuel.
However, government through the NPA has suspended the subsidy on Residual Fuel Oil (RFO), the fuel used by the manufacturing sector, effective November 1, 2022.
The authority has, however, maintained the subsidy on premix fuel to continue to cushion the fisher folk.
BY Jamila Akweley Okertchiri