Convert petroleum margins to taxes - ACEP urges govt

The Africa Centre for Energy Policy (ACEP) has urged the government to prevail upon Parliament to enact legislation that will convert all the margins on petroleum products into taxes to finance specific development projects across the country.

It said converting the Bulk Oil Storage and Transportation Company Ltd (BOST) margin, primary distribution margin (PDM), fuel marking margin and unified petroleum price fund (UPPF) would free up GH₵6.3 billion in annual revenues.

Such an amount, it said, could fund critical infrastructure and social programmes such as the Free SHS programme or the development of highways to open up the country.

“The market we are operating now shows that we do not need BOST or if we continue to have BOST, then we should commercialise it and put it on the stock exchange,” it said.

Petroleum levies are subject to parliamentary approval and not a decision to be taken by the National Petroleum Authority (NPA).

End premix subsidy

Presenting a study on the assessment of downstream petroleum product taxation and its efficiency in 2024, the Policy Lead, Petroleum and Conventional Energy of ACEP, Kodzo Yaotse, said putting BOST on the stock exchange would ensure transparency and accountability in BOST’s operations while reducing the GH¢0.12 burden on consumers.

“We also have to end the premix subsidy since all investigations on premix operations in Ghana show that the final consumers are not getting the product at the price that we are paying the subsidy for.

“There are some people that have allocated premix among themselves and sell it above the subsidised rates. So, if the people who are supposed to get the product are not getting it at the subsidised rate we want them to get it because of social equity concerns, why do we still keep it,” he asked.  

Lack of transparency and accountability

Mr Yaotse said between 2018 and 2024, the BOST margin, PDM, fuel marking margin and the UPPF increased by 300 per cent, 247 per cent, 350 per cent and 429 per cent, respectively.

He said consumers paid GH¢0.26 on every litre of petrol for primary distribution, regardless of whether the product passed through BOST’s facilities or not.

The PDM, he said, generated over GH¢1.2 billion annually, which went to fund political contracting for transportation services, allowing BOST to act as a lever for crony capitalism.

“More than 50 per cent of petroleum products distributed in Ghana were moved outside of BOST facilities, raising questions about the justification for that fee,” he said.

Mr Yaotse said the UPPF was imposed to ensure that petroleum prices remained uniform across the country.

“In reality, political settlement considerations appear to be driving the persistence of the UPPF, considering that there is no evidence to suggest that the absence of the UPPF would significantly raise fuel prices in remote areas.

“A major issue with the UPPF lies in the lack of transparency and accountability for the nearly GH¢5 billion in annual revenues accrued from the levy,” he said.

On fuel marking margin, Mr Yaotse said consumers paid GH¢9 per litre for the marking of petroleum products intended to ensure the authenticity and quality of fuel sold at retail outlets.

He, however, said documents from the NPA revealed that the contractor responsible for the marking process received only about half of the over GH¢400 million in annual margin revenues collected from consumers through a sole-sourced procurement arrangement.

“Between 2019 and December 2023, the sole-sourced contract for fuel marking was renewed five times, each time for short durations ranging from two to six months.

“Evidence from the NPA shows that the proprietary chemical agent used for marking fuel ends up in the hands of fuel smugglers,” he said.

In relation to BOST's margin, he said BOST received a GH¢12 margin on every litre of petroleum for the maintenance of its operations aimed chiefly at keeping strategic stock, a function that it had never performed.

BOST, he said, had recently taken on a more commercial outlook, competing directly with private sector players in the importation and sale of petroleum products.

“BOST controls about 20 per cent of the petroleum import market through its Gold for Oil programme, reinforcing its recent deviation from its core mandate.

“This shift has raised concerns about BOST’s continued receipt of margins (almost GH¢600 million annually), particularly since the company operates tax-free assets while competing with private businesses that pay taxes,” he said.