25% power tariff cut would be a good start – AGI

Although they are waiting to see whether the expected power tariff reduction will be in respect of levies or cumulative tariffs, players in the industrial sector have said a 25 percent reduction, as Vice President Bawumia has hinted, would be most welcome – at least for a start.

“That would be a good step, at least to start with. We believe that is the way to go, and as we progress I am sure in the course of the year, or subsequently, if we get the generation mix in favour of cheaper sources the tariff would go down further,” outgoing President of the Association of Ghana Industries (AGI) James Asare-Adjei told the B&FT.

In an interview with the B&FT on his expectations of the 2018 budget, which will be presented today in parliament, James Asare Adjei said one major challenge confronting businesses now is the high-power tariffs, hence the budget must come up with clear strategies to address it.

“We want to see macroeconomic stability translated into growth, and here we want to see a significant reduction in electricity tariffs. For a year or so now, we have seen stable power to industries, but the cost of power to industry and the private sector is worrying.

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“At the moment industry is paying in excess of 21 cent/kwh when we are competing with a sub-regional average of between 14-17 cent/kwh, and this is difficult to compete with. And more so, the industrial hubs of the world are paying about 3-5 cent/kwh. So, the AGI expects significant reduction and other mechanisms to sustain this reduction in the power tariff; such that industry will not be made to subsidise residential power users,” he said.

Mr. Asare Adjei further argued that when power is made cheaper for industry it will boost production and lead to the creation of more jobs, which will in turn boost the purchasing power of households to be able to pay for power they consume.

“So, it is in the interest of the economy that industry has cheap power,” he said.

“There should be a system where even cheaper sources of power are made available for industry use. So, the AGI has been advocating using hydropower, which is about 9 cent/kwh, for industry’s use. And once we do that we are stimulating production, and that gives the opportunity for businesses to upscale and create more jobs,” he said.

Speaking in Dubai recently, Vice President Mahamudu Bawumia said: “We will actually be seeing some significant reduction in the cost of electricity for industrial production next year in Ghana, and that can be as much as 25%…”

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A 25 percent reduction in cumulative tariff for industry would bring the tariff down to 15.15 cents from 21cents, which would be within the sub-regional average that the AGI president alluded to.

Hasten stimulus package

James Asare-Adjei also urged government to hasten processes to implement the stimulus package it promised “distressed companies” in the 2017 budget, as its delay is hurting companies identified to benefit from it.

Again, the AGI wants the 2018 budget to spell out clearly how the One District, One Factory programme will be implemented on a large scale to drive industrialisation.

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