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Home Business ACEP Urges Ghana to Abolish Premixed Fuel Subsidy, Cites Inefficiencies and Corruption

ACEP Urges Ghana to Abolish Premixed Fuel Subsidy, Cites Inefficiencies and Corruption

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Irregular Premix Fuel Supply
Irregular Premix Fuel Supply

The Africa Centre for Energy Policy (ACEP) has called on the government of Ghana to abolish its premixed fuel subsidy, citing systemic inefficiencies, corruption, and growing debts linked to its continued implementation.

ACEP’s Policy Lead for Petroleum and Conventional Energy, Kodzo Yaotse, argued that the current subsidy system has failed to benefit the intended recipients—fisherfolk—while creating avenues for fraud and mismanagement.

Speaking at a press conference on January 20, 2025, Yaotse outlined several key issues plaguing the subsidy program, including discrepancies in fuel consumption data, which suggest possible smuggling and diversion of the fuel to areas with little need for it. ACEP’s research highlighted that nearly all of the GH₵680 million generated annually from the Price Stabilisation and Recovery Levy (PSRL) is being misappropriated through the premixed fuel subsidy, with little to no advantage reaching those it is intended to help.

Yaotse emphasized that a direct financial support system for fisherfolk, instead of the current fuel subsidy, would provide a more efficient and transparent way of supporting the sector. He also suggested exploring alternative and sustainable solutions, such as the introduction of solar-powered fishing boats, which could reduce the sector’s dependency on fuel while promoting environmental sustainability.

The organization’s findings, which are based on data from the National Petroleum Authority’s (NPA) 2024 consumption report, also revealed significant concerns with hidden margins in the petroleum pricing structure. These margins, which are not subject to parliamentary approval, amounted to GH₵7.6 billion for the period under review, with the Bulk Oil Storage and Transportation (BOST) margin, Primary Distribution Margin (PDM), and other levies increasing by hundreds of percentage points since 2018.

These hidden costs have burdened consumers, Yaotse pointed out, with the PDM alone generating over GH₵1.2 billion annually, despite over half of petroleum products in Ghana bypassing BOST facilities altogether. This has raised questions about the justification for such a levy, especially given that the PDM is meant to cover transportation costs for petroleum products that do not pass through BOST’s storage and distribution network.

ACEP also noted the unsustainable nature of petroleum subsidies and inefficiencies tied to the energy sector’s debt servicing. According to their findings, a substantial portion of the revenues generated from fuel levies is being used to service debts in the energy and road sectors rather than funding development projects. ACEP has therefore recommended that the government convert various margins into tax revenues and redirect those funds toward essential infrastructure and social programs, such as the Free Senior High School (SHS) initiative or highway development.

In an effort to increase transparency and accountability in Ghana’s energy sector, ACEP proposed the commercialisation of BOST and its eventual listing on the stock exchange. This move, ACEP argued, could ensure better management of the state-owned entity and reduce the burden on consumers.

As the debate over fuel subsidies continues, ACEP’s recommendations highlight a broader concern about the sustainability of Ghana’s energy sector, with calls for reforms aimed at improving efficiency, reducing corruption, and better aligning the sector’s revenue generation with national development goals.

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