Petrol prices to go up again

Cabinet has proposed the establishment of a new bill, which seeks to impose an additional levy on petrol and petroleum products. The new bill is to be debated by Parliament imminently.

The objective of the levy is to finance the payment of the huge debt at the country’s refinery - Tema Oil Refinery (TOR) and all interest accruing on the debt.

As a permanent solution to the TOR debt, Cabinet is proposing a levy of ?640 per litre (US 7.5 cents per litre) be levied on all petroleum related debt incurred by the refinery.

The bill titled the Debt Recovery Fund Bill, according to a B&FT report, is being proposed to establish a fund to finance payment of these debts and to provide for related matters.

Though the fund is to be established under the Consolidated Fund, it will not actually constitute a part of the Fund. This is to avoid the usual bureaucratic administrative and secretarial expenditures associated with the setting up of a new fund but at the same time avoiding the constitutional limitations on how monies in the Consolidated Fund can be disbursed.

The Finance Minister will manage the fund and shall ensure the collection of monies assigned to the fund.

Cabinet has also proposed that any amount collected in excess of the full ex-refinery cost of the Tema Oil Refinery Company on the petroleum products be passed on to the consumer in the form of price reduction on petroleum products. This amounts to a promise to reduce prices of petroleum products in the event of lower crude oil prices or refinery costs.

The petroleum products to be levied at ?640 per litre are premium, premix, kerosene and gas oil. Others are marine gas oil, residual fuel oil and liquefied petroleum gas.

As at the end of December 2002, the Tema Oil Refinery company was estimated to have accumulated a total debt, principal and interest inclusive of ?4.5 trillion.

Government, in 2001, issued bonds worth ?1027.5 billion of TOR debt of this ?370.8 billion was issued against TOR’s debts to Standard Chartered Bank while Ghana Commercial Bank was issued bonds to the tune of ?656.6 billion. A further ?1.4 trillion in bonds was issued to Ghana Commercial Bank in 2002.

The financing of TOR debt through the issuance of bonds was considered a bridging operation to minimize the impact of the debt on the national budget by restructuring what were originally short-term debts into medium term debt.

If the proposed Bill is passed by Parliament it will push the price of a gallon of premium fuel to about ?23,000, an increase of some 15%.

While the Bill is expected to meet stiff opposition from the minority National Democratic Congress (NDC) in Parliament as well as civil society. But it certain that the NPP will use its slim majority in the House to push the bill through.