The Politics of Deceit in Petroleum pricing!!!

I am not an economist so I have been struggling to understand the word subsidy as has always been applied by politicians in relations to subsidizing prices of petroleum products in Ghana. I read on the Ghana web recently, a news item with the heading: NDC WILL SUBSIDIZE PRICES OF PETROL.

The Government under President Agyekum Kufuor is said to have removed all subsidies on petroleum products to make the consumer pay the full recovery cost of petroleum products. One still wonders why Americans with their high average wages compared to Ghana, can still refine and sell petrol between $2.50 - $3 per gallon with government taxes included in that price, and we in Ghana pay people 25 times less and sell petrol at 50-100% higher! Don’t let us forget Americans build their highways and city roads with their petroleum taxes and Ghanaian politicians are always borrowing money and still we have nothing one can describe as highway (except a short 23 mile Accra-Tema motorway built 40 years ago).

According to the World English dictionary , subsidy is

1. Money given by government: a grant or gift of money from a government to a private company, organization, or charity to help it to function

2. Help with expenses: a monetary gift or contribution to somebody or something, especially to pay expenses.

LET US EXAMINE TWO SCENARIOS.

Scenario number one: According to any lay man’s understanding, subsidy means Government paying a portion of the original price of a commodity to the consumer. Let us say for the purposes of argument, that the Ex factory price for one gallon of Petrol is 60,000 Cedis, but because that will be too much for the consumer and will invariably result to high cost on goods and services, and create inflation, the Government decides to pay 20,000 Cedis, and pass on the balance of 40,000 Cedis to the consumer. This is what I will call subsidy. Let me break it down further for better understanding. If Tema oil refinery (TOR) sells one gallon of petrol to Government, at 60.000 Cedis and the Government sells to the public at 40.000Cedis, that will mean that Government subsidizes one gallon of petrol by 20.000 Cedis.

Scenario number two: The Ex factory price of one gallon of petrol is 20.000 Cedis, According to the Government annual budget projections, one gallon of petrol has to be sold at 60.000 Cedis in order for Government to get enough money for projects and to pay salaries of workers. If Government sells at 40.000 Cedis, it will not realize the expected annual income from the petroleum sector of the economy. I would like the economic professors to tell us, why selling petrol at 40.000 Cedis a gallon instead of 60.000 Cedis should be called subsidy instead of reduction in petroleum Taxes. If they choose to call it subsidy, then selling one gallon of petrol for any price could still be classified as subsidy because Government can decide to sell petrol at any price it chooses, ad INFINITUM. Whatever amount Government sells petrol above the ex factory price is indeed and truthfully taxation. Therefore if Government decides to sell one gallon of petrol at 60.000 Cedis under its budget projections, and decide to sell latter at 40.000 Cedis, I do not think it should be classified as subsidy, because the Government doesn’t buy the petrol from the factory at 60.000 Cedis and sell to the public at 40.000 Cedis.

The simplest explanation to what I am dragging at is, as long as Government does not buy one gallon of petrol from the T.O.R at 60.000 Cedis and sell to the public at 40.000 Cedis, they should stop using the word subsidy completely. By using the word subsidy, they deceive the people to think that the T.O.R sells one gallon of petrol to the Government at much higher price and they Government sells at a reduced price to the public. If this is the case, then I would have no problem using the word SUBSIDY. Until I got the real facts about the pricing of petroleum products in Ghana, I was, and hope a lot many Ghanaians were of the impression that Government paid higher prices for petrol and sell it cheaper to the public, when they talked about Government subsidies on petrol prices.

For the NDC to promise Ghanaians that they will subsidize prices of petroleum products when they come to power is deceptive and as usual, political jargon. At the same time, the NPP claim of having removed all the subsidies on petroleum products for Ghanaians to pay the full cost recovery, is also a lie, deceptive, and political dishonesty.

TYPICAL EXAMPLE TO BUTRESS THE ARGUMENT:

If the true cost of educating a University student is ten Million Cedis a year, and Government decides to charge Eight Million Cedis to alleviate the hardships on parents, then the Government will have to look for money somewhere to offset the balance. This is what one can refer to as subsidizing University education. Again if the cost of Fertilizer and other farming inputs are expensive and Government decides to absorb 30% of the cost of every imported farming input to attract farmers to produce more for our consumption and export, then Yes, that is subsidy to farmers. Other typical examples include the Free spraying of Cocoa and extension services which are all subsidies to the farmers. I hope readers can make the difference and see the logic of my argument. Government must not lie to the people with the use of words that do not apply in all situations.

THE FACTS:

The actual cost of producing one gallon of petrol from the Tema Oil Refinery is not more than 14 thousand Cedis according to available figures, and confessions by Former Minster of Energy and Fuel, Ato Ahwoi in 2006. The price per one gallon on the market is 42.135 thousand Cedis or thereabout as of date. What are these government officials talking about then, when they use the word subsidy? The above argument shows clearly that unless the government intends to deceive the people all the time, the NDC and NPP and whoever comes to power should talk about Subsidy ONLY WHEN THE COST OF ONE GALLON OF PETROL WILL BE SOLD AT LESS THAN 14 THOUSAND CEDIS OR JUST A LITTLE MORE THAN THAT.

If the NDC will reduce the price down from where it is when they are back in power, then they should promise a reduction of the overburdened taxes on petroleum products and not talk about subsidy as if they are going to do a favor to Ghanaians. All that these two major political parties are doing is politics as usual. Instead of them looking for ways to spread the Tax net wider and clamp down on waste in Government expenditures, they are only content in maintaining a dysfunctional political system that only favors the upper class, while those at the middle and bottom, keep on suffering under very high and poor conditions of living in a country which can boast of abundant natural and human resources (if we had good leadership and management).

For those who may not know, GHANA NATIONAL PARTY was formed to fight the injustices in our country with the hope to bring salvation to our people. We are out to make a difference in the lives of our people and make the usual politics of deception, greed, selfishness, graft and bribery and corruption and mismanagement, punishable as a deterrent to others.

GHANA NATIONAL PARTY will examine all that has been done on energy exploration and see what can be done in the interest of the people. We will examine thoroughly prices of petroleum products and definitely reduce the excessive taxation and bring prices to affordable levels. We believe that high price of petroleum is a major and the number one factor, in addition to the high duties and taxes imposed by the government, for the high cost of living in the Country. High inflation discourages investment as investors find it hard to get a good return in their money above inflation rate. We are not sacrificing enough for the future generations, in terms of developments; At least there is nothing that indicates development in Ghana in the last 40 years if one factors in population growth rates and the lack of equivalent job creation; so why are our people living in abject poverty, and do not even see any hope for a better tomorrow?

As far as NDC is concerned, they think they deserve another chance because of the failed promises of the NPP to alleviate the people from the economic hardships under the P/NDC rule. They think they have learnt their lessons being in opposition and will now make a difference, so Ghanaians must give them another chance. Good; but if 19 years could not enhance the lives of our people what new plans are they bringing on the table that the people of Ghana must take into consideration to give them another chance? Is it a chance to continue looting the country as they did in those 19 years of nothing but arrogance? What happened to the hundreds of billions of dollars in loans they gave their cronies and were not able to collect?

Some will argue the NPP may have done better, than the NDC but, there is really not too much to write home about in their favor for the last seven years. Corruption, mismanagement, greed, selfishness and arrogance are all a repetition of social evils that were prevalent during the P/NDC era. This is significant proof that there is no change from the old ways of doing politics of serving the interests of the few elites and awarding contracts to surrogates. After all, the NPP repeated answers for doing some stupid things has been, the NDC did the same. I am not sure if there will be any change in the political system from politicians living in an undeserved affluence if NDC or NPP wins 2008. The NPP, like the NDC, want to retain power to continue with the same old structures to milk the country because they think they have built a few miles of roads with borrowed moneys, and therefore deserve another chance. Which Government never built roads? Whose responsibility is it any way to build roads? Let us dream big and stop comparing Ghana to those war-torn other African Countries. Ghana deserves better.

The old political parties have had their chances and never performed. They have only succeeded in deepening the economic hopelessness of the people and today everything is far more expensive in a HIPC Ghana than any of the developed economies. No politician including the President, seem to care as long as they can claim their per-diem allowances when they travel, and live lavishly at the expense of the unfortunate poor majority.

GNP have dedicated and committed men and women ready to accomplish what others see as an impossible task of economic emancipation. Fellow Ghanaians, let all hands come on deck. WE CAN DO IT. Just trust yourself and join us. Let us tell the selfish and greedy politicians in the 2008 elections that they can not fool all of us all the time. I leave all for Ghanaians to debate. VISIT OUR WEBSITE PLEASE. www.natlparty.com

Ofori Ampofo (Chairman /co-founder GNP)
Ampofoofori@yahoo.com

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.