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Business News of Wednesday, 20 February 2013

Source: Daily Graphic

Finance minister justifies fuel price increases

The Minister of Finance, Mr Seth Terkper, has justified the partial removal of subsidies on the prices of petroleum products, saying it will ultimately benefit the poor and the vulnerable.

He explained that the subsidies were not properly targeted, thereby leaving the very people they were supposed to protect feeling the pinch.

The Finance Minister said the new regime would come along with better targeting that would benefit the poor.

“We had to withdraw the subsidies, but there are other cross subsidies that still remain in petroleum pricing. We were buying crude oil at prices far beyond what we provided for in the budget and this is unsustainable,” Mr Terkper said in an interview.

The government, acting through the National Petroleum Authority (NPA), increased the prices of petroleum products between 15 and 50 per cent, with effect from Sunday, February 17, 2013.

The new hikes mean that a gallon of petrol will now be sold at GH¢9.22 per gallon or GH¢2.0496 a litre, while the maximum indicative price for diesel is now GH¢9.31 a gallon or GH¢2.0683 per litre.

According to the NPA, the price of kerosene is up by 15 per cent and will sell at 104.65Gp per litre, while that of LPG is up by 50 per cent, selling at 194.85Gp per litre or GH¢24.36 per a 12.5 kg cylinder.

Mr Terkper said the savings that would be realised from the subsidy withdrawal would be pushed into infrastructural development and social goods such as education and healthcare delivery which would be of particular benefit to the poor and the vulnerable.

“What this means is that the higher prices that will be paid at the pump by way of higher transportation fares will be offset by far with improvement in social projects such as education and health care,” the Finance Minister explained.

He said the Ministry of Energy and Petroleum would soon start a number of projects such as solar farms and a portable stove policy which would help rural dwellers and other people who depended on kerosene to mitigate the impact of the hikes in LPG and kerosene prices.

He said there would also be other initiatives for better use of kerosene that would help the vulnerable keep pace with development.

On transportation, Mr Terkper said the government had, in the recent past, purchased more buses for the Metro Mass Transit Company and would sustain that in the coming months to ensure access to affordable transportation by the middle and lower income classes.

The biggest private sector umbrella body, the Association of Ghana Industries (AGI), is set to engage the NPA today to seek further clarification on the hikes and thereafter issue a press statement.

The government last adjusted the ex-pump prices of fuel products upwards by an average of 15 per cent in December 2011 to cover costs. In February 2012, however, it revised the adjustment downwards by three percentage points to reduce the burden on consumers.

According to government sources, since then, the prices of fuel products had been constant in the face of rising costs as a result of increases in the price of crude oil and the depreciation of the cedi.

A supplementary budget presented to Parliament in July 2012 put the figure of fuel price under-recoveries at about GH?228 million for the period of January to May, which were paid from the budget. By late May 2012, the ex-pump prices of fuel products again fell by about 15 per cent below their cost-recovery levels.

The 2012 Supplementary Budget, therefore, requested GH?290 million to pay for under-recoveries.

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