Remove petroleum taxes to bring down fuel prices – Minority to government

The Minority in Parliament is asking the government to consider the suspension of the Special Petroleum Tax and a review of the sanitation levy in the 2022 budget to help address the incessant increase in fuel prices.

According to the minority, taxies and levies contribute to almost forty percent of the final ex-pump prices of fuel.

President Akufo-Addo granted permission to the National Petroleum Authority to zero the Price Stabilisation and Recovery Levies on petroleum products for two months, and the NPA says measures are underway to implement the directive on November 1.

However, the Ranking Member on the Energy Committee of Parliament, John Jinapor, says the intervention is woefully inadequate to cushion Ghanaians against the hardship caused by the rise in fuel prices.

“We hold the view that the special petroleum tax imposed on petroleum products must be suspended in the 2022 budget. This will provide some respite for Ghanaians from that agonizing high cost of fuel at the pumps,” he said.

He added that “if you look at the 2021 budget, the benchmark petroleum price was pegged at $54.75 per barrel. Today, the world market price has risen to $85 representing an increment of 55%, so if you take what we projected and what is actually happening, it means that petroleum prices have increased by 55%. As a net exporter of petroleum products, we have done the computations and we have come to the conclusion that from the initial amount of $800 million that we were projecting to receive, we are likely to hit $1.2 billion by the end of the year.

The price of fuel has increased significantly in recent times with driver unions already threatening to increase transport fares to make up for the changes.

Read the full statement below:

STATEMENT READ BY HON. JOHN ABDULAI JINAPOR ON THE RECENT FUEL HIKES UNDER THE AKUFO ADDO/BAWUMIA-LED GOVERNMENT.

Good morning, ladies and gentlemen of the press.

We welcome you to this Press Conference by the NDC parliamentary caucus and wish to begin by expressing our gratitude to the media for your continuous support in the professional discharge of your duties.

The Minority has followed with keen interest the persistent and rampant increment in fuel prices which appears to be worsening in recent times with no hope in sight.

The recent astronomical increases in fuel prices at the pumps and its attendant high cost of living to the ordinary Ghanaian cannot be glossed over.

Ladies and gentlemen, it may interest you to know that within a spate of just one year, fuel prices have risen from 4.77 cedis per litre to 6.8 cedis per litre representing a whopping 43% increment under this insensitive government. These astronomical increases have resulted in untold hardship which is threatening the lives of ordinary Ghanaians.

The Minority has equally taken notice of the lame and flimsy excuse from the government and its communicators that they cannot do much to cushion Ghanaians because in their own words “they do not control the world market price of crude”. What they have failed to inform Ghanaians about is that the devaluation of the cedi is a major contributor to these astronomical increases.

We wish to state emphatically that we completely and flatly reject these lame excuses from the government; the question we seek an answer to is “since when did the current NPP government led by President Akufo Addo and Dr Mahamudu Bawumia realise that the government had no control over world market prices?

Ladies and gentlemen, is it not these same people who promised the people of Ghana prior to assuming office that they will abolish the energy sector levies describing them as obnoxious and further promising to move the country from taxation to production?

On the contrary, what Ghanaians are witnessing under this government is a complete display of incompetence, arrogance, and deception as far as the Energy sector is concerned.

Not only have they retained the so-called obnoxious taxes, but they have also gone a step further to increase the existing taxes and, in some instances, introduced new draconian taxes which continues to worsen the living conditions of the already impoverished citizens of this country.

Ladies and Gentlemen of the press, it will be recalled that the Akufo-Addo government during the course of the year announced a paltry 4% increase in wages for public sector workers for the 2021 financial year, by comparing this wage increment against the current inflation of about 10.6% (Bank of Ghana), one can only come to the conclusion that the ordinary worker is already worse off and therefore cannot be burdened further with such astronomical increases in fuel prices as this negatively impacts on the cost of living.

In short, the income of workers are really not increasing but the steep rise in prices of essential commodities is making it so unbearable for the citizenry to cope with the economy.

As a result of bad leadership under Akufo Addo and Bawumia, the level of frustration and discontent is fast spreading among the populace with increasing loss of confidence in the current administration.

Members of the press gathered here, despite the announcement of a so-called 100 billion cedis “Obatampa Cares Programme” in the 2021 budget, the ordinary Ghanaian is today faced with unprecedented hardship, suffering and excruciating poverty with no hope in sight.

The current state of the Ghanaian economy clearly signals complete despair, characterized by a mounting unsustainable debt level that threatens the very foundation of the economy. Is this what we were promised prior to the December 2020 elections.

Rather than taking the necessary and pragmatic steps towards ameliorating the suffering of the citizenry from their harsh policies, the NPP government has resorted to their usual sloganeering by claiming to suspend the Price Stabilization and Recovery Levy for just two months. This is a complete insult to Ghanaians as it demonstrates the government’s lack of sincerity and seriousness towards mitigating the suffering of the citizenry.

Ladies and gentlemen, a critical look at the price buildup of petroleum products at the pump reveals that taxes, levies and margins alone account for almost 40% of the final ex-pump price. Today, Ghanaians and businesses cannot even plan properly due to the unbridled and unpredictable fuel price increments which are fast becoming the order of the day.

Ladies and gentlemen, the attempt by the government to blame world market prices of crude for this high fuel cost is untenable. Following the additional increment of the Energy Sector Recovery Levy of 20 Pesewas, and introduction of the Sanitation and Pollution Levy of 10 Pesewas in the 2021 budget as well as increment in margins fuels prices jumped by about 12.48% between the last pricing window of April to the 1st window of May. The almost 13% increment in fuel prices arising from these aforementioned tax handles cannot be attributed to world crude prices.

At this juncture let me set the records straight! For the record, Ghana is a net exporter of crude oil and must rather benefit from any price increment at the world market and not the contrary. It is therefore untenable to punish Ghanaians with such astronomical fuel hikes on the back of world crude price increments. This irony and contradiction cannot be tolerated.

Distinguished Members of the press, the minority taking cognisance of the worsening situation and the incompetence being exhibited by this government has taken the pain to proffer some concrete and cogent suggestion as part of our responsibility to ensure that the consumer is cushioned and have some respite, proposes the following:

1. The Special Petroleum Tax imposed on petroleum products must be suspended in the 2022 budget to provide some respite for Ghanaians from the agonising high cost of fuel at the pump. We make this demand because crude prices which were pegged at a bench-mark price of $54.75 dollar per barrel in the 2021 budget statement has risen to over $85 representing an increment of over 55%.

As a net exporter of crude oil, Ghana’s revenue receipts from petroleum exports are therefore expected to increase from the initially projected figure of $800 million to over $1.2 billion. What this means is that the nation is making huge unanticipated revenues from crude exports hence the need to abolish the Special Petroleum Tax to ameliorate the suffering of the ordinary Ghanaian.

2. Despite the introduction of a sanitation levy of 10 pesewas per litre of fuel, the country continues to be engulfed in filth with poor management of garbage across the various towns and cities of the country.

We, therefore, call for a review of the sanitation levy by resorting to the polluter pay mechanism which is a more pragmatic way of managing our waste. It is untenable to tax the ordinary fuel consumers since the consumption of same does not contribute to the waste being generated daily.

3. The economic management team under the leadership of Dr Bawumia have lost it and must sit up, and be proactive by working with the Bank of Ghana to release Forex when needed especially for BDS and other players in the oil and gas sector. We also wish to caution the Vice-President, in particular, to refrain from making false and unwarranted claims about the currency since that goes to affect the credibility of information emanating from his outfit. Ghanaians will recall that soon after declaring that he has successfully arrested the Dollar and handed the keys to the IGP, the Cedi in 2019 recorded its worst performance over a four-year period depreciating by almost 13%. Such false assurance has the tendency to negatively impact business confidence.

4. Government must with immediate effect reconstitute the Board of the Tema Oil Refinery and appoint a substantive Managing Director with the task of ensuring that the refinery is able to process domestic crude to its fullest capacity.

The current state of TOR leaves much to be desired. It will be recalled that as part of efforts to revamp TOR and ensure value addition to our domestic crude, the NDC at the time procured about 2million barrels of crude for processing by TOR.

Unfortunately, but characteristic of this administration, that parcel of crude which was procured by the NDC administration for TOR to process was sold under very opaque and bizarre circumstances. Today as a result of bad management and poor leadership, the Tema oil refinery is on the verge of collapse with the government proposing to turn it into a tank farm.

We wish to state that we reject the decision by President Akufo-Addo to turn the refinery into a tank farm, we believe that with the right policies, the refinery can be turned around to fulfil the purpose for which it was built.

5. It is a well-known fact that the Akufo Addo government inherited 3 oil fields, even more importantly as a result of the visionary leadership of the previous NDC government, the Atuabo Gas Processing Plant which was commissioned by President Mahama currently supply over 30% of the Nation’s domestic LPG requirements.

Despite these developments, the cost of LPG today continue to be astronomically high with its accompanying high tax handles thereby compelling some would-be consumers to resort to biomass such as wood-fuel, cow-dung, charcoal etc. as their primary source of fuel. We wish to place on record that since assuming office President Akufo Addo has added nothing significant to what he inherited in Ghana’s petroleum sector.

We, therefore, demand that the Finance Minister, Mr Ken Ofori-Atta, take the necessary step by withdrawing the nuisance taxes imposed on LPG during the presentation of the 2022 budget. Failure to do so shall compel the Minority to use every legitimate parliamentary means to ensure the right thing is done.

6. Ladies and Gentlemen, it will be recalled again that the NPP in opposition vehemently opposed the Energy Sector Levies Act promising to scrap it on the assumption of office.

Aside from handing over a balance of about 250 million to the NPP government, they have so far collected over 15 billion Cedis in revenues under the ESLA. Despite the huge collection, the Energy sector continues to suffocate under this administration mainly due to mismanagement and misapplication of the ESLA revenues.

Today, the debt of the Ghana Gas Company alone has ballooned to almost $1 billion. We, therefore, call on the government to take urgent and pragmatic steps to ensure the judicious use of the revenues by applying them to the original intended purposes.

7. We are also aware that this government through the GNPC has gone ahead to sign a take or pay agreement for an LNG facility to be situated in Tema despite berating the NDC government for signing take or pay agreements.

The negotiated LNG price is the highest gas price since it is indexed to crude. Surprisingly the agreement has not been tabled before parliament for approval. The minority demands that the agreement be renegotiated and laid before parliament for scrutiny.

8. We equally demand proper accountability on the collections, utilization and balances of revenues accruing from the Price Stabilisation and Recovery Levy which is primarily meant to cushion consumers in times of high crude prices. From our records and based on volumes of fuel sold, the PSRL should accrue about 2.5 billion Cedis. We completely reject the narrative from the government that the PSRL was not fully implemented as this will be a complete violation of article 174 of the constitution.

Therefore, discounting for the amount utilized for procuring pre-mix fuel and residual fuel oil, the government must make available the balance of the PSRL to cushion consumers since there is no evidence of how the balance was utilised.

9. Over the past 4 years (2017-2020) the Akuffo-Addo Bawumia government alone has received more than $3 billion from crude oil exports, the highest for any government in 4 years and yet there is nothing substantial to show for the unprecedented revenue streams. This is so because the revenues accruing from crude exports have largely been spent on Goods and Services to the detriment of critical infrastructure or Capital expenditure.

We, therefore, call on this government to re-prioritize and focus on critical capital expenditure which will go a long way to anchor the economy for long term gains.

10. Despite the claim by the Akufo-Addo/Bawumia Government’s that they have reduced taxes and levies in the petroleum sector, the facts point to a complete opposite to their erroneous claim. Let me provide you with incontrovertible facts on the levies and Taxes.

i) Energy Debt Recovery Levy has been increased by 20%

ii) Price Stabilization and Recovery Levy up by 40%

iii) The Unified Petroleum Pricing Formula has been increased by 164%

iv) BOST margin has increased from 3 Pesewas to 9 Pesewas representing a 200% increase.

v) The fuel marking margin levy has also been increased by another 233%

This is against the background that the volume of petroleum products consumed has increased by 35% from 4 billion litres to 5.5 billion litres.

We wish to serve notice that such steep and astronomical increases without justification is partly to blame for the high cost of fuel hence will not be countenanced. We shall therefore use the necessary parliamentary processes to reverse these draconian decisions.

Ladies and gentlemen, we wish to send a strong signal to the government that we will not countenance any further tax increases or new tax handles. This is not what the NPP promised Ghanaians prior to the 2020 elections. We were told the economy was on track, we were told that all was well and Ghana was ready for a takeoff; what has changed? We, therefore, demand the abolishing of these taxes.

Thank you.

John Abdulai Jinapor (MP)

Ranking Member -Mines and Energy Committee.

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