Subsidy On Residual Fuel Oil Suspended

The National Petroleum Authority (NPA) has announced the suspension of subsidy on Residual Fuel Oil (RFO) for industries.

It was not communicated when this will remain in force but it took effect on November 1, 2022.

RFO is fuel oils that remain after the distillate fuel oils and lighter hydrocarbons are distilled away in refinery operations.

Until the subsidy suspension, the government absorbed about 70% of the price of RFO used by industries according to the Member of Parliament for Pru Constituency, Dr Kwabena Donkor.

Earlier this year, he called on the government to scrap the subsidy during an interview, indicating that it was hampering the increase in the production of RFO.

“As we speak today the ex-pump price for RFO is Ghc1.63 per litre, the ex-refinery which is the production cost is Ghc4.25 per litre. This is a relic from the days when subsidies were the order of the day. So the Ghanaian State pays more than 70% of the price of residual fuel oil. This is used by the industry”, newghana.com quotes him to have said.

He continued, “In the first place, why should the Ghanaian State subsidise RFO for the industry? I call on the Minister for Finance to take immediate steps to close these loopholes. The Energy Sector Levy Act has the provision for payment. If you take the Price Stabilization Levy component it has provision for this subsidy.

“We don’t even need to amend the law, it is a policy decision. So we take the policy decision to charge ex-ref, {and} take away the subsidy. If the subsidy is not there, they would not be on the obligation to pay. So this is a policy decision and the Minister of Finance should take that policy decision.”

According to the NPA, the suspension of the subsidy was in line with a directive from the Ministry of Energy.

The directive, it said, is to ease the financial burden on the Price stabilization Recovery Account (PSRA).

“The policy directive takes into consideration the growing concern about the sustainability of the Account to meet the under-recovery payment obligations for premix fuel and RFO”, a statement from the NPA said.

Source: opemsuo.com/Hajara Fuseini