Michael Creg Afful’s thoughts … What consumers expect to see after three pesewas increment in BOST margin

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In the second week of December last year, one issue that emerged at the energy sector front, particularly the downstream sector in Ghana and was discussed in the media was the increment of Bulk Oil Storage and Transportation (BOST) Company Limited’s margin.

The government, through the downstream regulator, National Petroleum Authority (NPA), announced a 100% increment of BOST Margin from three pesewas per litre or some cumulative 10,200,000.00 to six pesewas per litre or some cumulative 20,400,000.00 from consumers based on current conservation estimation of 340m litres of fuel consumed monthly.

The Unified Petroleum Fund was increased by 4.7 percent or GHc1 (one pesewa) from 21 pesewas per litre to 22 pesewas per litre or some 3,420,000.00 cumulatively. However, the increment in BOST Margin did not sit well with some interest groups especially a consumer advocacy group – Chamber of Petroleum Consumers, Ghana (COPEC).

The position of COPEC Ghana, which was championed by Duncan Amoah, was that the increment was going to cause more hardships on petroleum consumers hence the need to withdraw the increment. In an interview with Accra-based Citi FM, Mr Duncan Amoah wondered why BOST should even be given a margin when private depots that operate in the country do not get any margin from commercial drivers (trotro) as well as taxi drivers.

He simply wanted the BOST margin to be scrapped. After few days of pressure on NPA and for that matter the Akufo-Addo administration, the regulator announced to the consuming public that the increment had been reversed. By that news, the Duncan Amoah-led COPEC was excited about the government’s decision. My understanding was that BOST would have raked in GHS10 million on a monthly basis if the government had stayed the increment. The company would have generated, at least, GHc50 million by the end of May if the increment had remained. I’m sure BOST would have utilised this amount wisely and even gone ahead to borrow to start rehabilitation of some of its pipelines and storage tanks that are in deplorable state because of lack of funds.

In an interview with Business & Financial Times (B&FT), prior to the increment of the Margin, Managing Director of BOST, Edwin Obodai Provencal noted that the BOST Margin of GHc0.3 pesewas was implemented in 2011 but it was not adjusted even though parliament had ratified that it should be increased to GHS0.6 pesewas in 2017.

Meanwhile, the company needs more revenues to bring in more products, build infrastructure and trade among others. Mr. Provencal expressed, among other things, that he is dedicated to transforming BOST into a dividend paying organisation, but he was of the view that to be able to do that, it requires heavy investment in infrastructure and to generate the needed revenue that requires that the BOST Margin be increased.

“Our vision is to be the best in storage and transport in terms of revenue market share, which means that we should have the best storage and transportation infrastructure to transport the products throughout the country,” he said. In his estimation, it was going to require an investment of about US$ 150 million to be able to turn the fortunes of BOST. Then at a media engagement on 27 December, 2020, it was revealed that BOST had 51 kilometres storage tanks, but as we speak, 15 kilometres of the pipelines are out of service. This sad state of BOST recently, caught the attention of the Executive Director of Institute for Energy Security (IES) Nana Amoasi VII, also known as Paa Kwasi Anamua Sakyi, wrote a piece about the State of BOST’s pipelines.

In his article titled, ‘BOST abandons pipeline infrastructure at the expense of the state’ the author cited a report by the U.S. Association of Oil Pipelines (AOPL), which showed that 16.2 billion barrels (nearly 680 billion gallons) of petroleum products delivered through pipelines in 2014 in the United States, reached their destination safely by an amazing 99.999 percent.

Sadly, same could not be said when it comes to using Bulk Road Vehicles. According to the article, a study by the Manhattan Institute compared the safety of road, rail and pipeline hydrocarbon transportation and found that transporting oil by roadway had the highest rate of incidents with 19.95 per billion ton miles per year.

This was followed by rail with 2.08 per billion ton miles. Oil pipelines were found to be the safest with 0.58 serious incidents per billion ton miles. Aside its safety records, pipelines have the advantages of being able to handle large volumes, having good continuity with 24-hour uninterrupted transportation, being unaffected by weather conditions in the transportation process, and having a low unit freight transportation cost (Wang et al, 2019). This means the use of Bulk Road Vehicles (BRVs) for the transportation of fuel, which is done currently is not the best option. But how can BOST make use of pipelines when its pipelines have been down for years? The current infrastructural state of BOST, needs a serious attention.

If BOST were in a healthy state, it could have taken advantage of the recent dramatic fall in the crude oil prices to as low as U.S $17 per barrel in April, 22. 2020 and stored some products.

Despite the strong opposition to the BOST Margin increment, Managing Director of the company, Edwin Obodai Provencal did not give up on his quest to ensure that the Margin was increased to give the company a new life.

Fortunately for him, Cabinet gave a second thought to his request and approved the increment effective June 1. The MD and his team are now happy but the Minority in Ghana’s Parliament especially Ranking Member of Mines and Energy Committee, is unhappy about the action of the government. To Adams Mutawakilu, the increment of BOST Margin was wrongfully timed.

He couldn’t fathom why the government would be asking Ghanaians to pay more for fuel at the time COVID-19 is having psychological, mental and economic impact on Ghanaians.

Inasmuch as this argument is sound, the question that begs answer is when will it be appropriate to increase the BOST Margin? We have been told that it was way back in 2011 when Parliament okayed the increment of the BOST Margin. Unfortunately, that was not done for almost nine years, even though there had been increases in goods and services over the past nine years. At this point, what we need is not a reversal of the government decision, but rather demand value for.

We should see the Edwin Provençal-led management of BOST giving us value by utilising monies which would be generated from the Margin judiciously and wisely. We want to see the dysfunctional pipelines repaired. We want to see restoration of fuel transportation through pipelines not by BRVs. We want to see rehabilitation of the storage tanks that have been down for years. There are some Ghanaians who perceive BOST as a cash cow for political parties especially in election year. If this is true, we want to see an end to that. We want a BOST that is able to keep strategic stock for between three to six months.

We want to see a dividend paying BOST as the MD has promised to deliver. Once BOST becomes efficient and serves Ghanaians whose taxes are used to pay the workers, I’m sure we will not have a reason to protest any future increase in BOST Margin.

I want to conclude this article with a quote from Luke 12:48 which says, “But the one who does not know and does things deserving punishment will be beaten with few blows. From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked.” We therefore expect BOST to give us much.

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