Unified Petroleum Price Fund Decreases

Mr Kofi Buah Minister of Energy and Petroleum (7)A comprehensive audit report by the Ghana Audit Service of the Unified Petroleum Price Fund (UPPF) established to, among other things, achieve efficient petroleum distribution system, showed that the performance of the fund declined over the period 2010-2012.

According to the report, the fund’s indebtedness had increased by 76 per cent from GH¢8,661,368 in 2011 to GH¢15,263,168 in 2012, adding that in 2010, the indebtedness of the fund was GH¢14,514,411.

“Our analysis of these figures indicated that, average age of the debt owed Oil Marketing Companies (OMCs) is two months which is within the processing cycle for claims from the OMCs,” the report added.

The report said, apart from a surplus of GH¢9,517,362,124 in 2010, the fund posted a deficit of GH¢ 9,517,362 and GH¢ 26,800,420 respectively during 2011 and 2012,mainly due to poor operating performance leading to freight cost exceeding total freight income.

The report said, the Fund Coordinator failed to recover an amount of GH¢4,720.000 from the Ministry of Energy and Petroleum which had been pending since 2008.

According to the report, the money was used to subsidise consumption following an increment in the ex-pump price of petroleum products.

“The ministry had not made an attempt to settle the amount outstanding as at December 31, 2012, while no demand has also been made on it for settlement,” the report said.

The Auditor General, Richard Quartey, in a transmittal letter to the Speaker of Parliament, said the purpose of the audit was to assess how the resources collected were channeled into the fund, and the subsequent disbursement from the fund.

“We found that the UPPF has the appropriate governance structure in place for its operations, except that it has not provided for inclusion in the structure of the Bulk Distribution Companies which were involved in the supply, storage and distribution chain,” the Auditor General said in the letter.

“We also found that UPPF’s operating cost was increasing as a result of the non operations of Bulk Oil Storage and Transport depots, and distribution channels, which has resulted in abandoning the zoning system for lifting petroleum products.

The report said the fund had put in place a zoning system where products were lifted from the nearest storage depots to retail outlets which ensured efficiency and economy of operations.

It said, it relied on BOST’s depot, and distribution channels to operate the system, but “we found at the time of the audit that these depots and distribution channels were not in operations”.

The report recommended that the Ministry of Energy and Petroleum, and the National Petroleum Authority, BOST bulk distribution companies, OMCs and National Security, should engage themselves to address the issues.

Additionally, the report recommended that the Ministry of Transport, should be consulted to address issues concerning operations of barges on the Volta Lake.

The report revealed that another import mode for BOST to move large volumes of products over long distance was the use of the barges pulled by tugboats along the Volta Lake, adding that the BOST had invested in the construction of two new barges in addition to the old one, all capable of moving a total of 3.30 million litres of products at a go on the Volta Lake.

“We however found that the barges were lying idle at the Akosombo port which is owned by the Volta Lake Transport Company Limited (VLTC). Our enquiries revealed that the barges were lying idle because of an impasse between the VLTC and BOST over operations of the barges along the lake,” the report said.

It said management insisted that as owners of the port, the barges and landing facilities built by the NPA on the lake should be handed over to them to operate.

According to the report the situation accounted partially for the inability of BOST to transport petroleum products to the Buipe depot in the northern part of the country, adding, “the effect of these distribution challenges was they the zoning system instituted by the UPPF was rendered inoperative resulting in products being lifted mostly, from Tema zone to retail outlets in other parts of the country.”

The report also found out that the country had no strategic stocks to shore up supply in difficult times, and that the BDCs which are private entities could not be relied upon to hold strategic stocks because that might not be in their best interests financially.

“The overall effect was that, the operations were efficient, and economical because it led to payment of higher freight to OMCs as a result of longer journeys undertaken,” it said.

In the opinion of the Auditor General, it would be unfair to pass on the cost of distribution inefficiencies to consumers by increasing the UPPF margin to offset costs in freight costs resulting from a breakdown in the zoning system.

The report said management committee had increased the UPPF margin built into the ex-pump price of white product by 30 per cent from GH¢5.30 to GH¢ 6.90 per litre in February 2013 to make the fund self sustaining.

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