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Over-recoveries of petroleum products settles NPA Debt.

  • SOURCE: | qwesa2big
  • npaThe Chief Executive Officer of the National Petroleum Authority (NPA), Mr Moses Asaga, has said that the authority has settled the GH¢412 million debt it owed the Bulk Oil Distribution Companies (BDCs).

    The settlement followed money the authority got from over-recoveries when the prices of petroleum products dropped on the world market.

    In an interview with the Daily Graphic, Mr Asaga said with the drop in the price of crude oil on the world market, the NPA had successfully paid off its indebtedness of GH¢412 million to the BDCs through over-recoveries.

    He explained that the over-recoveries became possible through the decision of the authority to implement a balancing act that saw a cumulative reduction in the prices of petroleum products by 12 per cent which was lower than what Ghanaians had expected.

    Decision not to reduce prices unpleasant but..

    Unpleasant as the decision may have been for Ghanaians, he said, the amount owed the BDCs which was as a result of under-recoveries arising from the government subsidising the prices of petroleum products in the past posed a threat to the financial health of the BDCs.

    That, he said, was because the debt had created a financial crunch for the BDCs who had to rely on banks for support adding that with their indebtedness to the banks, there was no way the banks would have given them any additional funds to import crude.

    If that had happened, he said, it would have led to shortages in the supply of petroleum products and so to ensure a regular supply, the authority had to use part of the windfall to pay the BDCs.

    The NPA’s indebtedness to the BDCs as of July 2014, he said, stood at GH¢412,005,982 adding that payments of the amount began from August 2014.

    “As of January 31, 2015, all outstanding debts owed the BDCs had been cleared,” Mr Asaga told the Daily Graphic.

    Hedge policy to protect Ghanaian consumers

    He announced that the NPA would from Sunday, March 1, 2015, implement a hedge policy for petroleum products as a move to insulate Ghanaians from having to pay more in the event that world prices of those products escalated.

    The price of crude  oil at the world market fell to a record low of $ 46 but in recent weeks, the price has inched up to about 64 dollars thereby raising fears that it might climb higher.

    A hedge is like an insurance policy that insulates consumers from paying prevailing prices when prices move from a previous low rate to a higher one.

    The downside to the hedging policy is that, in the event that prices fall lower, the country will not enjoy any windfall.

    Mr Asaga explained that with the price of crude oil moving from $46 to $60, the over-recoveries that came to the authority reduced by a third from GH¢65 million to GH¢24 million.

    The government, he said, was putting in place a mitigating account into which the over-recoveries, following the settlement of the indebtedness to the BDCs, would be paid.

    “Accruals in that account would then be used to cushion consumers in the event of prices going up,” he said.

    “But with prices rebounding, we cannot do that again and have to resort to other means,” he said.

    The hedging, he said, would safeguard consumers from price volatility on the world market adding that the NPA was hoping that prices would go up to $70 per barrel and that any increase beyond that had to be hedged.

    He explained that with the hedge policy, even if prices of petroleum products should cross the $70 mark, Ghanaians would not experience any further change in the ex-pump price.

    Source: Daily Graphic

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