The National Petroleum Authority (NPA) has said it became unsustainable to keep the subsidy on Residual Fuel Oil (RFO) because it was affecting supply.
It explained that suspending the subsidy on RFO was done to ensure regular supply of the product to industry, since the high price of fuel and continuous depreciation of the cedi against the dollar have made it unsustainable to keep the subsidy on RFO.
Speaking at a press conference in Accra on Wednesday, the Head of Economic Regulation-NPA, Mr. Abass Ibrahim Tasunti, said revenue the country was generating from the Price Stabilisation and Recovery Levy had not been enough to pay for the subsidies-cost emanating from RFO and premix fuel.
He stressed that as the price of fuel and the exchange rate rise, subsidy levels also rise because full cost of the products is not being passed on to the consumer.
“The suppliers of this product (RFO) are refusing to supply because the subsidies are not being paid on time. Also, because the subsidies are not being paid on time, the companies have refused to supply the product. They sell and they are not recovering the full cost; and they are also not getting the subsidies paid to them,” he said.
Government paid GH¢136million as subsidy on RFO in 2021, and again paid GH¢52million out of the total subsidy of GH¢154million for the period January to September, 2022, leaving a balance of GH¢102million.
Mr. Tasunti said the manufacturing industry had suffered to access RFO for powering their machines, leading to the closedown of some factories.
He said the NPA had engaged players in the manufacturing sector on challenges in the supply of RFO, and the resolution was that in the meantime subsidies on RFO should be removed so they can pay the full cost to ensure regular supply of the product and get their factories running.
“The industry players prefer to pay the full cost of RFO, so they can continue running their factories rather than not having their products at all,” Mr. Tasunti said.
He said the alternative product the manufacturing industry can use is diesel, but cost of the product is very high now.
When the Price Regulation Policy was introduced in July 2015, government decided to keep subsidies on RFO and premix fuel.
And to ensure that these subsidies are funded, the Energy Sector Levies Act introduced a levy called the Price Stabilisation and Recovery Levy to pay for subsidies on RFO and premix.
Mr. Tasunti said the revenue generated from the Price Stabilisation and Recovery Levy will be focused on only premix fuel for now, while the subsidy on RFO will be taken off until things change.
However, government through the NPA has suspended the subsidy on Residual Fuel Oil (RFO) – the fuel used by the manufacturing sector – effective November 1, 2022.
The Authority has however maintained the subsidy on premix fuel to continue cushioning the fisher-folk.