Energy Analyst Concerned Over Increased Tax on Fuel Products: “Not Justified”
- The Centre for Environmental Management and Sustainable Energy has called the GH¢1 increase in the Energy Sector Levy unjustified
- The government believes the tax increment is needed to ease the US$3.1 billion energy sector debt and stabilise the power sector
- The centre's director, Benjamin Nsiah, urged the government to root out inefficiencies in the energy sector to counter the debt concerns
Don't miss out! Get your daily dose of sports news straight to your phone. Join YEN's Sports News channel on WhatsApp now!
The Centre for Environmental Management and Sustainable Energy director, Benjamin Nsiah, has been critical of the GH¢1 increase in the Energy Sector Levy.
Nsiah told YEN.com.gh that the increase in the levy, which will see an extra GH¢1 tax on every litre of fuel bought, was unjustified. The levy stood at GH¢0.95 before the increment.
Source: Getty Images
The government has said the tax increase is needed to support key procurement for power supply and is also necessary to clear the alarming US$3.1 billion energy sector debt.
But Nsiah noted that there are more efficient ways to address the debt and inefficiency challenges in the energy sector.
"The major contributors are that there is a lot of mismanagement. There is a lot of policy inconsistency. There are a lot of agreements that do not favour the Ghanaian with respect to power purchase agreements and also gas supply contracts.”
He also noted that the government is complicit because of consistent arrears hampering power distributors like the Electricity Company of Ghana.
Nsiah also reminded that similar levies, like the Tema Oil Refinery Recovery Levy under the Kufuor administration, have been introduced but to limited effect.
Effect of this tax on Ghanaian pockets
The finance minister assured that consumers would not immediately feel the impact at the pumps because of the strengthening of the cedi.
But Nsiah expects some negative effects to take hold because of the extra cost for fuel, mainly less disposable income for households.
"What it means is that the government is reducing the savings culture as well as the investment culture of the consumer."
The expert stressed that the government needs to stem the losses in the power sector, which are currently way above average.
Key to this will be settling the arrears that state agencies owe power distributors.
"Make sure that the system losses that are around 32% now are reduced to the barest minimum, to a certain average in Africa. In other African countries, they are doing 15%. Some north African countries are doing less than 10%.”
How has the government justified the increased levy?
Finance Minister Cassiel Ato Forson said the amendment for the increase would raise additional revenue to fund the needs in the power sector.
President John Mahama also defended the increase in the fuel levy, describing it as a necessary and justifiable step to stabilise Ghana’s energy sector.
Source: Twitter
The Minister for Energy and Green Transition, John Jinapor, defended the increment, saying it is the right time to impose it because of the favourable fuel prices.
After the strengthening of the cedi, fuel is now selling at between GH¢11 and GH¢12.5.
"Fuel was around GH¢16.00, and a sensitive government will not slap a tax when fuel is GH¢16.00. You couldn't have imposed that tax around that time when fuel was still very high, and so you needed to work to bring fuel down to this level and share the gain with Ghanaians."
Bawumia slams Mahama government over increased tax
YEN.com.gh reported that Former Vice President Dr Mahamudu Bawumia criticised the government for raising the tax on petroleum products.
Bawumia also accused the Mahama administration of campaigning on deceptive promises because of the introduction of what he called a dumsor levy.
He believes this increased tax is more costly than the scrapped Electronic Transfer Levy.
Proofreading by Samuel Gitonga, copy editor at YEN.com.gh.
Source: YEN.com.gh
