The Africa Center for Energy Policy (ACEP) is warning that Akufo-Addo's 3months relief for electricity consumers will endanger the sustainability of the power sector though they commend the intention of the government.
President Akufo-Addo in his sixth national update on government’s efforts to fight COVID-19 announced electricity subsidies for Ghanaians as one of the impact-mitigation measures to help the citizenry.
The directive is a complete waiver of the electricity bill of lifeline consumers of electricity and 50 percent reduction in electricity bill for all other consumers from April to June using March 2020 bill as the benchmark
In a statement from ACEP, it warned that the power sector is reeling in debt already and hence the idea to absorb the bills for consumers could worsen the already unsustainable power sector situation.
According to ACEP, “the total subsidy that will result from the policy intervention is about GHS3 billion. This constitutes about 2.7 billion in tariffs and about GHS300 million in Value Added Tax (VAT). The Tariff component will have to be paid to the power sector by the government. If the government does not pay, the sector’s liquidity situation will worsen."
It continued, “This policy also further deepens the budget deficit which is estimated to be about GHS9.7 billion. If the government intends to add GHS3 billion from the power sector, it will require another revision of the fiscal numbers presented to Parliament”.
ACEP adds that the COVID-19 pandemic has impacted many businesses and livelihood which require direct support from the government.
The Energy Think Tank is therefore pushing for proper targeting to provide the right support and reduce wastage arising from people who may not need the support.
In line with that, ACEP is recommending to government make lifeline consumption free for everyone, spend part of the proposed expenditure on electricity consumers to identify and support those most impacted by the pandemic, and additionally summon the creativity of the citizens to find appropriate mitigations strategy for the times.
Read full statement below: