Danquah Institute Challenges NPA

THE DANQUAH Institute (DI) has called on the National Petroleum Authority (NPA) to explain the formula that was used to review the petroleum

price build-up.

A press statement issued by the institute and signed by Gabby Otchere-Darko, Executive Director stated: “The NPA’s review of the petroleum price build-up raises a number of concerns:

Why is the NPA refusing to make the formula public?”  The petroleum pricing formula, which was transparently published during the previous administration, is made up of the ex-refinery price, taxes and margins. Why has this habit changed?”

The NPA announced a review of the petroleum price build-up, noting that it has decided to increase the Bulk Oil Storage and Transportation (BOST) margin by 50 percent and the marketers’ margin by 15 percent.

However, the NPA at the same time decided to reduce the ex-refinery price of petroleum products by 2 percent, with  no change in the prices at the pump.

According to the institute, when the present administration was in opposition, it complained bitterly about the high prices of petroleum products, particularly during the 2008 general elections.

“Since the last adjustment, petroleum prices on international markets have gone up, the exchange rate has been stable and related charges (bank lending rates) have not come down.

So on what basis did the NPA reduce the ex-refinery price by 2 percent?”

This 2 percent reduction is incidentally sufficient to ensure that the 50 percent increase in the BOST margin is not immediately reflected in the pump price,” it stated.

The DI revealed that there was a 2 percent reduction in the ex-refinery price though it said the increase in the BOST margin was permanent.

It revealed that the ability of the NPA to do this goes to buttress the point that there was a significant amount of padding in the previous 30 percent adjustment in petroleum prices.

“Otherwise why is government giving away much-needed revenue by reducing the ex-refinery price?” it noted.

In addition, DI mentioned that Government budget has suffered a major petroleum revenue leakage following the reduction of taxes in the 2009 Budget.

“Naturally, Government has been looking for ways to plug this hole, hence the increase in taxes on water, akpeteshie, rice, road tolls, among others.

“The DI is therefore of the view that the 50 percent increase in the BOST margin appears to be a stealthy way of increasing government’ revenue through the back door because after all, BOST is owned by the state.

Margins can be increased administratively by the NPA without seeking parliamentary approval,” it stated.

The institute further indicated that if BOST, which is state-owned, has to be funded, then Parliament should re-introduce the Strategic Stock Levy, adding,
“This would enable the people to know exactly what the money is for.”

Calling on government to urgently publish the petroleum pricing formula for all to see, the institute said both Government and the NPA should move the de-regulation  to allow the OMCs to decide on the margins.

“With that the price build-up would only end at the ex-depot price.

“The public should not be hoodwinked by the arbitrary actions of the NPA, but this indicates that the Government has been caught in a quagmire on the issue of petroleum pricing,” it added.