Business News of Wednesday, 24 June 2015
Source: Daily Guide
Government’s indebtedness to the Bulk Oil Distribution Companies (BDCs) reached about GH¢3.4 billion as of June 18, 2015.
Senyo Hosi, Chief Executive Officer (CEO) of the Chamber of Bulk Oil Distribution Companies (CBOD), who disclosed this to the media in Accra yesterday, said estimated price under-recoveries from April to June 2015 alone was GH¢223 million.
He said the debt represented foreign exchange under-recoveries, price under-recoveries and the financing cost (interest) for bearing price under-recoveries, also known as the real value factor (RVF).
Mr. Hosi said government’s huge debt has affected their ability to secure credit from banks to import oil.
That, he said, could result in the shortage of petroleum products on the market soon
“The BDCs are really suffering. Now, we have reached a limit where if we don’t settle the debt owed banks, they will not issue us letters of credit to purchase fuel. This means that we will not be able to supply fuel and could create fuel shortage”.
Mr. Hosi hinted that prices of petroleum products could go up soon, explaining that government cannot continue subsidizing the price.
He stated that government was supposed to increase fuel by 17.5 percent and not 14 percent, adding that government had offered about GH¢55 million as subsidies which is not sustainable.
The National Petroleum Authority (NPA) is putting in place measures to allow the full deregulation of the market.
Mr. Hosi argued that the liberalization of the pricing formula would only be an interim measure, noting that “the price liberalization will not bring petroleum prices down”.
He, however, called on government to put measures in place to fix the macroeconomic situation and strengthen the cedi against the major foreign currencies.
This, according to him, would be a more permanent solution since the exchange rate is an important part of the pricing formula.