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Oil companies under threat over GHc700 million government debt

  • SOURCE: | qwesa2big
  • fpsoGovernment’s consistent failure to pay GH¢700 million it owes bulk distribution companies (BDCs) since 2012 is posing a serious threat to the existence of the BDCs and commercial banks that extended credit facilities to the companies.

    Already, the debt, which came about as a result of under-recoveries in petroleum prices which the government considered as subsidies and some foreign exchange losses that the BDCs recorded in the third and fourth quarters of 2011 and the first and second quarters of 2012, is attracting huge interest from the banks.`

    The acting National Co-ordinator of the Association of BDCs, Mr Senyo Hosi, raised the alarm when he presented a paper on, “The BDCs and Deregulation”, at the maiden colloquium on Downstream Deregulation by the National Petroleum Authority (NPA) in Accra yesterday.

    Currently, the Bank of Ghana requires that each commercial bank must have a stated capital base requirement of GH¢60 million and Mr Hosi argued that the amount owed to the banks was capable of collapsing 11 of the 27 commercial banks licensed to do business in Ghana.

    The colloquium attracted stakeholders in the oil industry, ranging from the Tema Oil Refinery (TOR), the NPA, oil marketing companies, among others players.

    A Deputy Minister of Finance, Mr Cassiel Ato Forson, who was contacted on the issue, indicated, however, that the government understood the plight of the BDCs, especially when it affected their capital, and gave an assurance that steps were being taken to address their concerns.

    He explained that the debt was part of the slippage of expenditure from last year and that currently government revenue generation was in the right direction and  the amount would be settled very soon.

    Hammering some of the problems which the failure of the government to pay the debt had caused the BDCs, Mr Hosi said because the companies had borrowed from commercial banks at huge interests and were not paying, the banks were reluctant to loan out more money to them.

    He said at times the BDCs suffered daily demurrages of $30,000 because they were unable to raise letters of credit for imported oil from the banks.

    He expressed worry over the government’s constant rush to provide subsidies on petroleum products when it was not ready to back its claim with money and urged it to always support its subsidy interventions with cash to prevent huge indebtedness to the BDCs.

    Mr Hosi described the oil sector as one of the most sensitive areas of the economy which should not be politicised and pleaded with the government to uphold the independence of the NPA, especially by appointing people with varied backgrounds to its board.

    A former Energy Minister, Dr Kwabena Donkor, who also spoke at the event, warned against proposals to increase the prices of petroleum products in areas far from Accra to cover the cost of transporting the fuel to those areas.

    He explained that the uniformity of prices had been maintained because the poverty profile of the northern sector of the country, for instance, was high, hence the need to cushion the transportation cost to have an even price.

    He said although the NPA’s target was to make Ghanaians majority owners of oil companies in all downstream activities, the authority must target 90 per cent.

    The Chief Executive of the NPA, Mr Alex Mould, assured players in the industry that the government was committed to implementing the petroleum deregulation policy, particularly by subsidising only premix and refined fuel for industry and ensure that petrol, diesel and liquefied petroleum gas were sold at the full cost.

    The Executive Director of the Centre for Policy Analysis (CEPA), Dr Joe Abbey, appealed to the media to constantly educate the public on the nuances in the oil industry, especially the contributory factors that usually led to hikes in petroleum product prices, so that they would be prepared to accept new prices.

    Source: Daily Graphic

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