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Business News of Friday, 9 November 2012

Source: B&FT

'Remove LPG subsidies'

Government must remove subsidies on LPG if it wants to end shortages and ensure a regular, sustainable supply of the fuel, Torgbi Adaku V, President of the Ghana LPG Operators Association, has said.

Government reportedly spends some GH¢14million monthly to subsidise LPG in order to encourage people to move away from the use of woodfuels.

But the subsidies have encouraged the use of LPG for other purposes -- mainly transport -- than as a domestic fuel for cooking, causing demand to far outpace supply.

“I am not a policymaker and I am not doing politics; I am speaking from a purely business angle. I think the subsidies must make way for us to have sustainability in supply,” Torgbi Adaku said.

“There was a time in this country when we were forming lines at petrol stations to buy petrol and diesel. What was the cause? It was a problem of subsidies, because the government was subsidising the price of the products at the time. But now that government is doing full cost-recovery on the white fuels -- petrol and diesel – all the time we have those products in abundance. People don’t have to queue for them again.”

He said delays in the payment of the subsidies by the government also affect supply downstream, as importers await reimbursement for previous supplies before buying and releasing new stocks.

Last year, amid one of the most severe incidences of fuel shortage, the CEO of the National Petroleum Authority (NPA) Alex Mould asked government to consider removing LPG subsidies in order to stop commercial vehicle owners from using the product at the expense of domestic users who the subsidies are targetted at.

A survey by the Energy Commission in 2008 found that 37% of LPG consumption was in the transport sector.

But the government disagreed with Mr. Mould’s position, saying it will find other ways to curb the abuse of the subsidy while investing in additional storage capacity. Yet the shortages have persisted.

Indeed, aside from the subsidies, government has said it intends to introduce a rural LPG promotion programme, which will involve the distribution of small-sized cylinders to rural households.

A pilot programme will start in the northern parts of the country where the use of woodfuel is still very high, Mr. Wisdom Togobo, an official of the Energy Ministry, said.

This policy will boost demand even further and place further strain on the supply side of the market, in the absence of additional investments in supply capacity and storage.

Torgbi Adaku V also expressed concern about overpricing of LPG by some operators who purportedly take advantage of the shortage to charge more than recommended for the fuel. Currently, he said, 14.5kg of LPG is supposed to go for GH¢18.9; but some operators sell it for as much as GH¢25.

A lot of this cheating, he said, is happening in rural areas where the subsidies are meant to move people away from the use of fuelwood.

“Those you are crying for to have the subsidies, they are paying more for it there [villages].” He said from next year, his outfit will investigate and begin to “sanction” anyone in their membership who engages in needless price-hikes.

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