Abolish premixed fuel subsidy – ACEP

…cash incentives for fisherfolk advocated

By Kizito CUDJOE

The Africa Centre for Energy Policy (ACEP) has urged government to abolish the premixed fuel subsidy policy, citing inefficiencies, corruption and mounting debts associated with its implementation.

Policy Lead-Petroleum and Conventional Energy, ACEP, Kodzo Yaotse said direct financial support to fisherfolk would be a more effective alternative for fuel purchases, bypassing flaws of the current subsidy programme.

He further recommended exploring innovative solutions such as solar-powered fishing boats to enhance sustainability in the sector.

ACEP cited data which show irregularities in the consumption of premixed fuel, with a notable increase of usage in areas with limited need for the product. This, the think-tank said, points to possible smuggling, which undermines supply to fisherfolk who genuinely need the fuel.

“Nearly all the GH?680million in annual revenues from the Price Stabilisation and Recovery Levy (PSRL) is siphoned through the premixed fuel subsidy by cronies, offering little or no benefit to the fisherfolk,” ACEP noted.

Mr. Yaotse was speaking at a press conference by ACEP to discuss its findings on inefficient administration in the country’s downstream petroleum sector, and submitted that petroleum products are taxed almost everywhere in the world.

“Because it is a product that has inelastic demand, countries take advantage of that to impose significant taxes on petroleum products as a way of raising revenues to finance development,” he argued.

He added, for instance, that the rates vary from country to country, with some being high as more than 50 percent of the products’ cost.

While taxation on petroleum products is not new, Mr. Yaotse asserted that although Ghana’s taxes and levies on petroleum products may appear relatively insignificant, a study conducted by ACEP has uncovered several hidden margins – which he described as unjustified taxes burdening consumers.

Based on the National Petroleum Authority’s (NPA) 2024 consumption data, revenue accruals of prevailing levies in the downstream petroleum sector total GH?9.7billion. But margins imposed on petroleum products by the regulator, which are not subject to parliamentary approval, amount to GH?7.6billion for the period under review.

He disclosed that between 2018 and 2024, margins such as the Bulk Oil Storage and Transportation (BOST) margin, Primary Distribution Margin (PDM), Fuel Marketing Margin and Unified Petroleum Price Fund (UPPPF) increased by 300 percent, 247 percent, 350 percent and 429 percent respectively.

“If you consider levies accruing to the state from charges on petroleum products, only the Special Petroleum Tax really directly contributes to general government expenditure. The remaining levies are largely earmarked for addressing political sins of the past, such as paying for inefficiencies in the energy sector,” he stated.

He asserted that what could be a valuable source of revenue for development has instead been diverted to satisfy political settlements in the country.

Among other findings from the study, ACEP noted that consumers pay GH?0.26 pesewas on every litre of petrol for primary distribution, regardless of whether the product passes through BOST’s facilities or not.

The PDM, it was disclosed, generates over GH?1.2billion annually, “which goes to fund political contracting for transportation services, allowing BOST to act as a lever for crony capitalism”.

Moreover, ACEP maintained that more than 50 percent of petroleum products distributed in Ghana are moved outside of BOST facilities, raising questions about the justification for this fee.

“The PDM, intended to cover the cost of inter-depot transportation by BOST, is levied regardless of whether BOST facilities are utilised. This is particularly disingenuous given that over 50% of petroleum products bypass BOST altogether.

“Of the over-GH¢780million annual revenues from the Price Stabilisation and Recovery Levy (PSRL), a portion goes to subsidise premixed fuel with the rest unaccounted for,” ACEP disclosed.

It is on account of this that ACEP has recommended government to convert the UPPF, BOST Margin, Fuel Marking Margin and CRM margin into tax revenues and redirect these revenues toward development projects.

“This would free-up GH?6.3billion in annual revenues to fund critical infrastructure and social programmes such as Free SHS or development of highways to open-up the country,” it added.

ACEP also advocated commercialising BOST and listing it on the stock exchange to ensure greater transparency and accountability in its operations, while also reducing the burden on consumers.

Furthermore, it said government should prioritise addressing the energy sector debts in the short- to medium-term to free-up revenue for development purposes. “As much as GH?9.7billion worth of levies are earmarked largely for energy sector and road sector debt-servicing.”

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