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05.10.2004 Business & Finance

De-Regulating Petroleum Industry - Private sector To Take Control

By Graphic

The total deregulation of the petroleum sector will be achieved by February next year, the Minister of Energy, Dr Paa Kwasi Nduom, has disclosed. Under the programme, the importation and pricing of petroleum products will be solely handled by the private sector.

Speaking in an interview in Accra, the minister said the full implementation of the programme followed the success of the first phase, under which the Oil Marketing Companies (OMCs),were allowed to import refined petroleum products to supplement those imported by the Tema Oil Refinery (TOR).The government's decision to deregulate the sector was informed by the more than ¢2.3 trillion debt TOR had incurred by 2001 as a result of its inability to price the products to break even, a move that dislocated the banking sector and the economy in general.

Interest rates at the time went high to as much as 48 per cent, while inflation reached highs of about 41 per cent. Dr Nduom said the “final stages, where the pricing of the petroleum product will be left in the hands of the private sector is being finalised and we are working hard to get it done before the end of the year.”

“We need to finish this and allow Cabinet to approve it before any other authority also takes a look at it before it is finally implemented.”.The Energy Minister stated that this final stage needed to be done carefully to ensure that it worked, and also to prevent people from playing unnecessary politics with the issue. “We are working hard to ensure that it does not have any political problems,” Dr Nduom added.

“The decision of the government in this regard was important to ensure that the old ways of dealing with petroleum issues since independence does not arise again to throw the economy out of gear,” he said. Explaining how this will work, he said there would be a pricing formula which would be used to guide the private sector in pricing the products.

Dr Nduom said one of the key elements within the formula was ensuring that there was equalisation as the products would be bought at the same price anywhere in the country. Also to be considered in the formula, he said, would be cross subsidisation in favour of the rural poor in the area and the vulnerable in terms of kerosene and premix fuel for fishermen.

Dr Nduom said there would be an oversight body that would ensure that the private sector played to the rules that would be set before the programme took off.“They would also have the power to sanction any member who is not complying with the rules,” he added.

Dr Nduom said the private sector would be made to take cognisance of the international market price, saying “when the prices come down it should be reflected and when they go up, they will also push it up.” He said the automatic way of pricing in the past would be eliminated with the implementation of the programme.

Meanwhile some analysts have said that Ghana is not ready for such a programme because leaving the pricing of the petroleum products in the hands of the private sector would cause the prices of goods and services to go up. They said under the World Bank and the International Monetary Fund(IMF) programme,Ghana was supposed to have implement the programme before the end of this year as part of the conditionalities for joining the Highly Indebted Poor Countries (HIPC)initiative but due to the up coming general elections,the government had to negotiate to allow it to take off by mid-February next year.

They hold the view that once the government was able to negotiate for a suspension, it should be able to further negotiate for the country to be well prepared for it before it was finally implemented..

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