The Ghana Chamber of Bulk Oil Distributors (CBOD) has described the increment in the prices of petroleum products as a “bold but not adequate step”.
According to the Chief Executive of the chamber, Mr Senyo Hosi, the 23.08 per cent hike in the price of petrol (premium), 22.01 per cent increase in that of diesel and accompanying upward increases for other petroleum products were below the expectation of the BDCs’ 43 per cent price hike.
“The government is still exposed to additional subsidy. It is exposed to the forex subsidy due to the depreciation of the cedi which would have only been insulated by a 43 per cent increase,” Mr Hosi pointed out in an interview with the Daily Graphic yesterday.
He was reacting to the announced price hike in the prices of petroleum products which took effect from yesterday.
“As a result, government, in effect, is still shielding part of the cost for the consumer, which in the long run will accrue more debt,” he noted.
Mr Hosi was of the view that until the government boldly did away with subsidies, there would still be problems in the industry.
Very bold decision
According to him, the BDCs welcomed the government’s decision to increase the prices of petroleum products.
“The decision is very bold and a necessary step by the government and must be lauded as a critical step towards re-establishing funding confidence in the industry,” Mr Hosi said.
He stated that the government would have incurred an additional debt of GH¢95 million, being subsidies on two weeks’ consumption of petroleum products, if it had not increased the prices of petroleum products this week.
“Nonetheless, it must be noted the government is still exposed to additional subsidy and its accompanying future debts,” he noted.
Seven out of 10 banks which pre-finance the BDCs to lift petroleum products have pulled out due to the BDCs’ indebtedness to them.
Asked if the banks had rescinded their decision after the increment, Mr Hosi said, “We are still engaging the banks to recognise this step from government as a confidence booster.”
Calling for a public discourse on the need for the total removal of subsidies to guarantee uninterrupted supply of petroleum products, Mr Hosi said, “The discourse should be more on social interventions in mass transportation to help ameliorate the impact of the increment vis a vis the need to boost productivity through transportation.”
“When you move more people effectively and efficiently from point A to point B, it yields productivity,” he said.
Aside that, he said consumption of petroleum products would be minimised and thereby reduce the impact on forex requirement for import.
Meanwhile, the fuel price hike has resulted in a 15 per cent increase in transport fares across the country.
The increment in fares has been met with hostility from passengers who are already complaining of high cost of living.
The BDCs have, since the ending of June 2014, been faced with operational challenges due to the refusal of banks to issue letters of credit (LCs) to enable them to import finished petroleum products.
The government currently owes the BDCs more than GH¢1.3 billion, being subsidies on petroleum products from June 2011 to December 2013, while the BDCs owe the banks an equal amount of debt.
A private audit firm, Ernst and Young, has been contracted by the government to audit the debt. The report is expected to be out in less than a month.
The government has indicated its readiness to settle the rest of its debts after the completion of the audit.