Minister calls for review of taxes on Petroleum Products

By: Adu Koranteng

Defense Minister, Albert Kan Dapaah has added his voice to calls for a reduction on the tariffs on petroleum products to ease the burden of rising crude oil prices on consumers.

Kan Dapaah, first Minister of Energy in the New Patriotic Party government told The Statesman in an exclusive interview that there was the need to review the tax elements in petroleum prices with a view to mitigate unanticipated price hikes in recent weeks.

Crude oil prices hit $98 per barrel last month. But, oil prices fell Monday in a volatile market on speculation that OPEC may still boost output at its meeting this week despite last week’s sharp price drop.

Light, sweet crude for January delivery was down 67 cents to $88.04 in electronic trading on the New York Mercantile Exchange by midafternoon yesterday in Europe. The contract had earlier traded as high as $89.94 and as low as $87.47.

In London, January Brent crude dropped 24 cents to $88.02 a barrel on the ICE Futures exchange.

Crude oil contracts tumbled last week on expectations that members of the Organisation of Petroleum Exporting Countries will agree at a meeting Wednesday to raise production to help ease high oil prices.

That sent prices to their lowest level Friday since Oct. 25 — quite a turnaround from the start of that week when prices were approaching $100 a barrel.

But, the man who earned the nickname “Mr Affordability” as opposition spokesman on Energy nearly a decade ago, is calling on stakeholders in the petroleum industry to support the Finance Minister with suggestions on how to manage the rising fuel.

Asked whether he had regretted removing subsidies on fuel prices, Mr Kan Dapaah stood firm: “It”s not a matter of us regretting or now rescinding our decision on the issue of subsidy on petroleum products, but about finding alternatives to reduce the burden posed by the rising fuel cost on the poor in Ghana.”

It will be recalled that The Ministry of Finance and Economic Planning in November 2007presented two options for the consideration of Cabinet on how to minimize the impact of world-wide increases in crude oil prices on the Ghanaian consumer.

The proposal presented by the Minister was requesting for either a reduction on tariffs on petroleum products or reduction on funds allocated to other sectors of the economy to provide for subsidy on petroleum products.

The Defence Minister also rejected the idea on hedging which the finance ministry is said to be considering as a third option. He claimed that is not a viable alternative to the increasing crude oil prices on the international market.

Mr Kan Dapaah predicted that, crude oil prices could hit a $200 mark and that the only thing that government could do would be to continue reducing tariffs to curb price hikes. “Government is currently considering the options of either reducing tariffs levied on petroleum products or cutting down budget allocations to certain sectors of the economy to cover cost”.

The latest increment in petroleum products which took effect on the 17th of November is, the second upward adjustment within a month.

From an initial price of 97.78Gp per litre of premium petrol announced in November it now sells at 103.92Gp per litre, making it the fifth consecutive increment since the beginning of the second quarter of the year.

Gas oil moved from 95.28Gp per litre to 102.75Gp per litre, with kerosene jumping from 75.60Gp per litre to 94.29Gp per litre, Liquefied Petroleum Gas also moved up from 97.9Gp per kilogramme to 100.96Gp per kilogramme, with the price of premix fuel pegging at 73.40Gp per litre.

Meanwhile a section of the public that The Statesman interviewed on the issue welcomed the idea on tariff reduction with the view that it would reduce the high rate of fuel prices. They therefore called on government to intensify efforts on reducing the tariffs to ease the burden.