State loses GH¢868m through fuel dumping

The state in 2017 lost some GH¢868m to shady petroleum service providers who dump products meant for export back onto the Ghanaian market.

Due to tax waivers on some petroleum products meant for export, crooked service providers find an incentive in selling such products on the local market – which earns them a windfall.

“We have had unscrupulous petroleum service providers try to cheat the system by dumping export-declared products and Marine Gas Oil (MGO) declared to be sold to foreign vessels for economic gain and tax avoidance,” CEO of the National Petroleum Authority (NPA), Hassan Tampuli, said at a colloquium yesterday.

“MGO leakages are estimated to have cost the nation GH¢18million in lost tax revenue in 2017, while export dumping cost over GH¢850million,” he said.

A number of measures, he said, are being rolled out to curb the criminal activity, including the application of domestic taxes on MGO sold to foreign vessels and collaboration with sub-regional neighbours to help account for products declared as exports to those countries.

All these measures, he said, are aimed at removing the economic incentive to cheat the system – and they are seen to be yielding some results.

“Foreign MGO, for instance, has reduced from 20million litres a month to 290,000 litres a month based on the authority’s preliminary estimates,” he added.

Way Forward in 2018

In order to consolidate gains and make the industry more efficient, Mr. Tampuli said the authority intends to intensify activities toward plugging the supply leakages.

“Our activities will be geared toward assisting the Ghana Revenue Authority (GRA) achieve the Special Petroleum Tax (SPT) revenue target of GH¢1.8billion, and Ministry of Finance achieve the Energy Sector Levies Act (ESLA) revenue target of GH¢3.7billion, as provided for in the 2018 budget,” Hassan Tampuli said.

“We intend to roll out the second phase of the LPG refilling plant safety risk assessment. Currently, a total of 657 stations have been inspected using the criteria developed for the first phase, of which 59 remain closed down due to non-compliance,” he said.

The authority also seeks to amend its Act to give it enough legal backing to deal with the new wave of industry issues.

He assured that the Cylinder Recirculation model of LPG distribution will be implemented fully this year.

He said the relevant licences will be issued and safety protocols will be keenly observed to ensure the safety of Ghanaians, while increasing access to LPG for domestic, commercial and industrial use from the current 25 percent level to 50 percent.

The Energy Minister, Boakye Agyarko, also said government is focused on encouraging market-led innovations while removing barriers that undermine opportunities for those in the sector.

“I’m sure as an industry, you are also positioning yourself to make the most of the emerging opportunities. I am certain that an efficiency-led sector creates a positive environment that enables business operators to thrive, and we should be seen working toward that.”

He said one thing is certain, which is that in future the petroleum downstream sector will be very different from how it is today.

He therefore expressed confidence that the enabling environment means banks will be willing to do business with players in the downstream sector – without concerns they may not be able to recover facilities made available to the industry.

On the health and technology fronts, he said there will be changes in the fuels and technologies that are used in the country, and the way households engage with as well as control the use of their petroleum products.

“Therefore, business models will have to change and adapt to the trends in order to accommodate and drive these changes,” he advised.

The Vice President, Dr. Mahamudu Bawumia, in a speech read on his behalf said the industry has witnessed significant investment and expansion of petroleum products storage and outlet facilities – largely championed by the private sector, which is mostly dominated by a growing number of indigenous Ghanaian companies due to deregulation of the petroleum downstream industry.

This, he said, has translated to a significant number of new entrants licenced to operate as Petroleum Service Providers (PSPs) in the industry.

Consequently, he said, there are currently over 250 licenced companies across the value chain players, and support services in over 15 different categories of the downstream sector.

The sector has over the years contributed significantly to growth and development of the economy. Over the past four years (2013-2016) alone, the sector is estimated to have contributed over GH¢46billion to the country’s GDP – representing an average contribution of 10% per annum, he said.