NPA justifies suspension of subsidy on Residual Fuel Oil

The National Petroleum Authority (NPA) has justified the temporary suspension of subsidy on Residual Fuel Oil (RFO), saying the move is to ensure availability and supply of the product.

The RFO is a low grade of fuel oil, which contains the undistilled residue from atmospheric or vacuum distillation of crude oil and mostly used by manufacturing industries.

Head of Economic Regulation, NPA, Mr Abass Ibrahim Tasunti, addressing a press conference, in Accra, yesterday, said, due to increases in global fuel prices and exchange rates, funds accrued through Price Stabilisation and Recovery Levy, used in paying for subsidies on RFO and premix fuel, was not enough to meet the demand.

Currently, he said, the government was in debt of more than GH¢154 million, representing subsidy on RFO from January to September, this year.

Mr Tasunti indicated that so far, only GH¢15 million of the debt, which covers January to March of subsidy, had been paid with the total amount for April to September yet to be paid.

Also, he stated that, last year, the government paid to importers an accumulated subsidy of GH¢136 million on RFO.

The inability of the Price Stabilisation and Recovery Account to meet debt demands, Mr Tasunti said, resulted in the refusal of importers to sell the product, causing supply challenges for industry.

“The suspension of the policy to subsidise RFO is in line with the directive from the Ministry of Energy as an interim measure to ease the financial burden on the Price Stabilisation and Recovery Account (PSRA).

“The Policy directive takes into consideration the growing concern about the sustainability of the Account to meet under-recovery payment obligations for Premix Fuel and RFO,” Mr Tasunti stated.

He said the manufacturing industries, in an engagement with the government and NPA, favoured the suspension of the RFO subsidy so that they bear the full cost of procuring the product for their operations.

The alternative fuel for the manufacturing industries, diesel, according to Mr Tasunti, was more costlier than RFO, hence the decision the support for the suspension of the RFO subsidy.

“Looking at the situation, we engaged the Association of Ghana Industries (AGI) and industry and they agreed that the subsidy should be suspended for now.

“They agreed that it is better to pay the full cost of the RFO to have their factories running and operational,” Mr Tasunti said.

He said that although the engagement did not focus on whether or not the enhanced cost of production would lead to an increase in the prices of goods, and expressed confidence that the manufacturers would not overburden consumers.


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