Less than a week after Ghana’s capital, Accra, was laid to waste and through many years of institutionalized lawlessness, the National Petroleum Authority (NPA) proposes to introduce “free for all” pricing of petroleum products. The measure, termed deregulation, has like everything else that goes here, been talked about for 10 years with very little or no coherent action on HOW & WHEN
“So why the haste Now?” and “What is the legal framework?” have been two questions that have exercised my mind since the hasty announcement. The finger of suspicion points to IMF conditionality for the $900 million current bailout we are ‘enjoying.’ My search for an answer to the second has unraveled a quagmire of confusion and probable flouting of the laws of Ghana by the NPA, whose collusion in the Citing and licensing of petrol stations in built-up residential areas is one big powder keg of an apocalyptic destruction.
My own protégé Moses Asaga, whose current public service duty is Chief Executive of the NPA, has been hopping from one radio station another telling us all that “From June 15, the NPA will no longer be involved in the pricing of petroleum products. This forms part of the full deregulation of the petroleum downstream sector.”
The sudden announcement of such a major change in the pricing of the most important commodity that has driven economic activity in Ghana for nearly sixty years sent me into a frenzy search in search of whether there had been any recent public discussion, a policy paper or more importantly, the legal basis for the proposed action.
Alas my contacts with the usual suspects namely, the press who were reporting the imminent measure; industry experts, who are supposed to implement the measures; policy think tank experts and academics, who are called upon to pontificate on what is right and wrong; and of course Parliament, which has the responsibility for ensuring that all are actions are grounded in the laws of the land.
Having drawn a blank on all fronts, I started my own search by reference to the law as it presently stands, my first shock was the reported comment from Moses Asaga that “The NPA boss disclosed that his outfit will engage Parliament on the new pricing regime”. In the lingo of the ordinary Ghanaian, the NPA intends to act illegally and then go crawling to parliament to seek an appropriate legal authority after the event. Talk about “Shutting the stable door after the horse has bolted”
So alarmed was I that I rushed immediately to examine whether the current law give the NPA any wiggle room for their hasty and seemingly illegal act of ‘total deregulation”. Wow, shock and horror! The NPA’s proposed action would be in contravention of the existing law which prices petroleum products in Ghana.
Legislative Instrument LI 2186 NATIONAL PETROLEUM AUTHORTITY PRESCRIBED PRICING FORMULA REGULATIONS 2012 is the current law that prescribes how we should calculate and set petroleum product prices in Ghana. Article 1 states unequivocally that “ensuring that the ex-pump prices are the same throughout the country”. As far as I know this is the existing law unless somebody can point me to another.
The Schedule to the LI defines ex pump price as “ex-refinery price + Government approved taxes/ levies + distribution margins + price stabilization margin”
Contrast the law with the reported NPA statement that “the importers of the petroleum products – the BDCs and the suppliers of petroleum products will now bring in their products into the country at competitive prices and then sell to Oil Marketing Companies (OMCs) at competitive prices. The OMCs will then pass on the prices to the retailers at the pump and make sure that they are competitive”
The regulations go to set out very elaborate terms how the uniform pricing would be achieved. The Unified Petroleum Pricing Formula (UPPF) Margin is defined in the LI as a “ margin incorporated in the build-up of petroleum prices to compensate transporters who move petroleum products far into the hinterland and other parts of the country in order to ensure equal prices of petroleum products round the country”
A sleuth of taxes and margins are prescribed which go against the principle of the “hands off free for all” total deregulation of prices that is about to take place from next Monday June 15 2015. They all point to an imminent situation of confusion and mess for an intended policy that was first announced by President Kuffuor in his State of the Union Address on the 3rd of February 2005 and amplified by the late Baah- Wiredu in a statement to Parliament.
Contrast Moses Asaga’s optimistic that that “We believe that when it stabilizes, competition can even bring down prices” with Baah Wiredu’s honest admission that. “Initially, this policy is bound to cause some shock to the system. In the short term, it is likely to result in a rise in inflation”
The truth is that there is problem bedeviling the downstream petroleum industry. In a nutshell, it has to do with the failure to deal with the galloping FOREX rate of our currency and its impact on the costs differential between the time when purchases are contracted and the tine when payments are made. This is what the IMF and other so called Development Partners have dubbed as ‘SUBSIDIES” and the BDCs, other players in the industry and Government term as UNDER-RECOVERY.
The problem has become so acute that in the first four months of this year alone the losses attributable to under-recovery have outstripped the total value of all the taxes that have been collected; GHC 159,238, 989 in taxes, against GHC 168, 761, 530 in under –recovered losses; according to industry and government sources..
The rush to deregulate is to remove Government’s obligation to fund the under-recovery. The truth is that for as long as the cedi keeps falling as freely as it has been doing for the last 18 months, the effect will be a constant and regular rise in the price of petroleum products at the forecourts, The only difference will be that the higher prices will depend on the calculations made by the players of the costs they have incurred in getting the products to us.
If the NPA is to be used as the conduit for passing on the impact of the Government failure to manage a stable cedi, the least the long suffering Ghanaian deserves is total honesty, lawful conduct and absolute transparency in pushing deregulation with a haste faster than that of speedy Gonzales.
As I do not count legal training as part of my expertise, I have asked my hapless attorney to advise me and all Ghanaians of the soundness of the proposed action within LI 2168. If necessary he is under instruction to challenge the matter in a court of competent jurisdiction before the date the NPA.s intent comes into effect.
There are many like me who am of the view that the state must not meddle in business but limit itself to defining an enabling and conducive environment for business. That environment includes sound macro-economic management and lawful conduct. I am afraid the proposed deregulation falls short on both counts and we need to make sure the impending additional hardship on the hapless populace is done lawfully and orderly.
Press reports have the Minister of Energy Emmanuel Buah claiming in Kumasi that an Act was passed in 2005. Yes, the NPA Act (691) was passed in 2005. However this law requires that price setting be regulated according to the prescribed petroleum pricing formula. LI 2186 sets out that prescription and that prescription says prices will be the same in every nook and cranny of the land
By: Charles Wereko-Brobby, Chief Policy Analyst, GIPPO
Email: email@example.com .