Fuel prices to increase – COPEC GH

The Chamber of Petroleum Consumers-Ghana (COPEC GH) has warned there could be increase in fuel prices if government does not take immediate steps to halt the trend of hikes in the petroleum products.

The Chamber, in a statement, said the rising cost of fuel prices in the country has a direct impact on general cost of living and by extension inflation, and must be curtailed immediately.

According to the Chamber, transport operators have been fair and magnanimous around this period but cannot be expected to remain unconcerned for a very long time and could eventually increase their fares and charges.

“We also believe that scaling down on taxes will be much easier on the government revenue mobilisation targets if the government through the Ghana Revenue Authority plugs the various revenue leakages as far as the illegal fuel operators downstream continue to remain in business and depriving the government and the state the much needed resources and revenues,” the statement said.

Below is the full statement.

CHAMBER OF PETROLEUM CONSUMERS-GHANA

THE PRESIDENT REPUBLIC OF GHANA FLAGSTAFF HOUSE ACCRA

ATTN: H.E NANA ADDO DANKWA AKUFFO ADDO

Dear Sir,

FURTHER FUEL PRICE INCREASES AHEAD IF NO IMMEDIATE ACTION TAKEN TO HALT THE TREND.

25/09/17

The Executive Stakeholder Council of the Chamber having observed the increasing trend of pump prices in the country over the past few months with the possibility of even further increases in the price of diesel in the coming days, has had to convene an Emergency Meeting of Council Members on the 24th of September 2017, to deliberate on the disturbing trend in fuel prices increases across the country as well as other issues of concern.

The Executive Stakeholder Council is concerned of the following and will like to bring to your attention your Excellency.

1. The growing spate of increases in pump prices.

2. The threat on transport Fares adjustments across the country.

3. The disturbing issue of illegal fuel operators.

FUEL PRICES

The Council delved into the various individual components of the pricing template currently in use by the various Oil Marketing Companies.

The following components leading up to eventual ex pump prices were looked at individually.

1 (i). Ex-refinery price (Ii). Energy debt Recovery levy (Iii). Road Fund (Iv). Energy levy (V). Price Stabilisation and Recovery Levy (Vi). Primary Distribution Margin (Vii) Bost Margin (Viii) Fuel Marking Margin 2. Ex Depot price 3. Special Petroleum Tax 4. (I) UPPF (ii) OMC Margin (Iii) Dealers Margin

5. Ex-pump price

The above pricing template in use currently in Ghana is indicative of one thing, and that is, a huge number of levies, taxes and margins some of which have serious implications on final pump prices and needing some serious and critical scrutiny following from the trend we seeing at the pumps over the past 3 months.

1. Ex Refinery price

This is the price for which the imported finished product is charged by the importers taking into consideration world market prices and premiums, freight and insurance etc.

This index is mostly a function of demand and supply and is determined by market forces as well as geopolitical developments on the international market.

Government of Ghana and it's agencies have little or no control at all though it can make agreements with importers on how much to pass on directly to the Ghanaian or to pass on everything directly.

2 ENERGY RECOVERY DEBT LEVY

This levy at 41p/litre from the Energy Sector Levies Act (ESLA) of 2015 which has embedded in it 3p/ litre for the Tema Oil Refinery Debt Levy is basically charged to pay for energy sector debts including Bdc debts which till date has not been paid though the levies are being paid daily by consumers.

3 ROAD FUND

charged at 40p/litre on the current price build up, the road fund is earmarked for the road infrastructure in the country and is estimated to yield a minimum of Ghc100million each month.

5. ENERGY FUND

Charged at 1p/litre on current pric build up, this fund goes to the Energy commission to Aid in its work, it is estimated to yield at least Ghc2.5million/month per our current national monthly consumption figures.

4. PRICE STABILISATION AND RECOVERY LEVY

Currently charged at 12p/litre for petrol and 10p/litre for diesel, the Stabilisation and recovery levy is aimed at stabilising fuel prices for consumers in difficult times as well as stabilising for other social products like premix and residual fuel Oil, it is estimated to yield a minimum Ghc25million/month.

5 PRIMARY DISTRIBUTION MARGIN

Currently charged at 7.5p/litre on both petrol and diesel is aimed at ensuring products are moved across the various depots at no extra charge to people living in different parts of the country, this is estimated to yield a minimum Ghc18.5million/monthly per our current national monthly consumption figured.

5 BOST MARGIN

Currently charged at 3p/litre is aimed at maintaining BOST infrastructure as well as ensuring there is adequate national strategic stock cover, this is estimated to yield a minimum ghc7.5miliion/monthly.

7. FUEL MARKING MARGIN

Currently charged at 2p/litre to code or identify products certified and approved for the Ghanaian market also serves as a check on other illegal products especially those for transit that eventually finds its way back onto the Ghanaian market, this is estimated to yield a minimum of ghc5million/month per current national monthly consumption figures.

8. SPECIAL PETROLEUM TAX

Currently charged at 15% of all Ex-Depot Price which is a summation of all the taxes earlier mentioned together with world market prices or Ex-Refinery price is currently at 50p/litre and has moved from 43p/litre in July. This particular tax remains a huge problem to the entire price build up and will continue to rise or go up anytime world market prices go up, it is currently estimated to yield around Ghc125million/monthly per current national consumption figures.

10. MARKETERS MARGIN

This margin at 20p/litre is what the oil Marketing Companies manage for their investments in the downstream sector and to also pay for their current and recurrent costs, most Omcs often adjust this margin to as low as 3p/litre sometimes in order to stay competitive due to the deregulated market environment.

11. RETAILERS MARGIN

Currently pegged at 25p/litre is what the various dealers, operators or retailers get for their investments and costs in the running of the outlets.

All the above narrations with the exception of Ex-Refinery, are subject to one review or the other at the behest of the government of the day based on prevailing economic indications.

OUR RECOMMENDATIONS ON TAXES.

1. ENERGY DEBT RECOVERY LEVY

It is our understanding that this levy is to be used for settling of some debts accruing from the energy sector but cannot be collected without proper audit or accounting for same to appraise the public of current standings with the various debts especially the Tema Oil Refinery Debt Levy which has been collected over the past 1w years without any proper accounting for nor current debt position known.

Attempts by the Energy Ministry to also raise the Energy Sector Bond must be done with every level of transparency possible.

2. ROAD FUND

Again we request for real time accountability to the good people of Ghana on accruals so far made to this fund and what it's application is or has been over the period since it was last increased from 8p/litre to the current 40p/litre.

3. ENERGY FUND

We will once again be happy to know the allocation and application of this fund and if possible an attempt to

4. PRICE STABILISATION AND RECOVERY LEVY

This is one of the levies whose intended use and actual use since it's inception in 2014 remains very unclear to the Ghanaian public and consumers who continue to pay as of this day and time, we demand a better and proper explanation for why we should continue to be surcharged for Stabilisation of petroleum prices whiles prices continue to rise both on the local market and the international market without any mitigation in place to stabilise pump prices.

Using monies collected from users of petrol and diesel for Stabilisation of same cannot be in any way justified for using to stabilise social products as premix and Rfo as we are being told.

5. PRIMARY DISTRIBUTION MARGIN AND UPPF.

We believe it's time to have a rebook at this particular margin and the UPPF since the two seem to be doing almost same things by ensuring products move from one part of town to another without added costs to the consumer anywhere he finds himself within the country, and where possible, merge them to ameliorate the already packed levies and margins build on the price template.

6 BOST MARGIN

We recommend for a rethink of this levy, Bost has gone into and is still into fuel trading as all other depots in the country and cannot and should not be treated any special from how Chase Petroleum, Sahara and other depots operate.

7. SPECIAL PETROLEUM TAX

It is our expectation that both the National Petroleum Authority and the Ministries of Finance will do a critical analysis of this particular tax element on the price build up to find a lasting solution to the sort of confusion and difficulty it leaves on both the industry and the consumer.

For the avoidance of doubt we recommend the adoption of one of the following.

a) Repositioning of the SPT from its current Ex-Depot price position to Ex-refinery will curtail the element of double taxation as it stands now.

b) Fixing of a specific amount instead of the current 15% charge, it is our considered view that fixing of a specific amount for the special petroleum tax instead of what it is currently will prevent it from fluctuating or increasing anytime the other indexes preceeding the Ex-Depot price increases.

We believe Ghanaians will see some relief in their pump prices if any or all of the above stated short recommendations are adhered to for the benefit of all.

CONCLUSIONS

The rising cost of fuel prices in the country has a direct impact on general cost of living and by extension inflation and must be curtailed immediately forthwith.

Transport operators have been fair and magnanimous around this period but cannot be expected to remain unconcerened for a very long time and could eventually go up though some others have already increased their fares and charges.

We also believe that scaling down on taxes will be much easier on the government revenue mobilisation targets if the government, through the Ghana Revenue Authority, plugs the various revenue leakages as far as the illegal fuel operators downstream continue to remain in business and depriving the government and the state the much needed resources and revenues.

It is a widely known secret that the state has, within the past few months, lost over Ghc320 million in revenues to the activities of the illegal operators, whiles the industry has also lost over 160million litres within the same period.

Thank you.

Counting on your usual co-operation. Signed Duncan Amoah Executive Secretary/Council Secretary Accra.