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Government urged to allow greater participation in procurement of crude oil

  • SOURCE: | Editor
  • Mr John-Peter Amewu, Director Research and Policy at the Africa Centre for Energy Policy (ACEP), has appealed to the government to allow for greater private sector participation in the procurement processes of crude oil devoid of political interference.

    He said this would stimulate competition and allow the ex-pump price of the product to fall and reflect the true industry picture.

    Mr Amewu told the GNA in an interview that though reforms allow private sector participation in the industry including procuring crude oil and refined products through tendering mechanisms supervised by the National Petroleum Authority, the system is botched by government interference.

    He proposed that the automatic pricing reform where the burner tip price of the product is adjusted regularly in accordance with international crude oil price hikes should be encouraged with NPA acting as regulator.

    He said public agitation against automatic pricing and government control should be limited through intensive and sustained education in a bid to insulate the masses against price volatility.

    Mr Amewu said the application of different tax structures to different petroleum products must also be encourage with adequate measures to ensure that the target groups actually benefited directly from the tax elements.

    Mr Amewu said government should embark on massive public transportation regimes and deploy other social activities targeted at the poor and vulnerable as well as increase expenditure on social services.

    He suggested re-examination of the ex-pump price, urging government to consider eliminating the exploration and Tema Oil Refinery (TOR) debt recovery levies from the price build up to make life more comfortable for people below the economic ladder.

    “In designing a credible subsidy regime, care must be taken by the authorities not to exclude those that, the subsidy is intended to protect as we are currently experiencing under the subsidy regime for kerosene. Similarly it should not include those that are not anticipated to benefit,” he said.

    Mr Amewu said “subsidies should be provided for granting access and other capital expenditure rather than operational expenditure and also for consumption purpose. Production subsidy is the way forward but not consumption subsidy.”

    He outlined challenges to the subsidy reforms as difficulties in identifying the exact group to benefit and directing assistance to them when targeted reforms are implemented, estimating the right size of the subsidies and public reactions to the reform and successive government’s persistent use of centrally administered pricing system as political tool to win votes.

    According to Mr Amewu, the total consumption subsidies estimated by ACEP during the 2000-2008 period amounted to US$ 3 billion, which translates into an annual average of about US$ 428million explaining that in 2007, there were no subsidies due to 30 percent average increase in the domestic retail price of the products.

    In 2008, there was a total subsidy of more than US$ 600 million which was equivalent to 1.8 percent of the 2008 GDP of US$ 34.93 billion. This amount was about 92 percent higher than the 2006 figure of US0 million.

    He said figures from the National Petroleum Authority (NPA) indicates the cost of subsidy from 2009 to  2012 was over GHS 1.5billion and the projection for 2013 by NPA, if the chronic condition remained would be about GHS2.4billion

    GNA

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