…Deregulation Won’t Bring Fuel Prices Down’-BDCs Charge
Chief Executive Officer (CEO) of the Ghana Chamber of Bulk Oil Distributors (CBOD), Senyo Horsi, has said that the decision by the government to leave the pricing of fuel products in the hands of the private sector, would not automatically bring down prices of petroleum products, contrary to widely held view by industry players and the ordinary citizen.
Mr. Horsi, is of the view that, until government removes some of the taxes and ensures that the exchange rate is lowered, prices of petroleum products, will keep rising even in the event that, prices go down in the world market.
The CBOD chief made this comments, when his outfit yesterday organized a day’s training workshop in Accra on petroleum downstream sector for journalists to “demystify” the wrongly held opinion that, the sector is a very complicated area.
According to Mr. Horsi, though the decision by government to implement the deregulation of prices of petroleum products was the way to go, Ghanaians needed to accept the on-going plan, while politicians change from the “general talk of prices and taxes. Petroleum politics, we should all work to kill it”.
In his view, the deregulation if followed, would ensure constant supply of products, help government not to keep compounding debt which goes to reduce the confidence of the various banks who lend credits to these companies for constant supply of the product.
Historically, various attempts by successive government to subsidize fuel products to cushion the poor, has not achieved much result, and Mr. Horsi, thinks the best way to help these targeted group, is for government of the day to put in place some pro-poor interventions that would go directly to benefit underprivileged members of the Ghanaian society.
He mentioned one of them as the mass transportation system, which could be enhanced to alleviate the plight of Ghanaians.
In four years, government according to Mr. Horsi, owes the BDCs over GHC 3.4 billion, accruing from under recoveries as of June 18, 2015. The under recoveries, mostly come about as a result of the exchange rate, under recovery loss and price under recovery losses.
Ghana’s deregulation policy started in 2005, but started it final phase just last week, after government washed its hands off the pegging of petroleum products.
The decision at the time, paved way for the sector to allow greater participation of the private Oil Marketing Companies (OMCs). The BDCs, are licensed to import refined products or offtake from local refineries to wholesale to OMCs. There are a total of 28 of them in the country as at now.
He believed that fixing the macro-economic situation, would be a more permanent solution since the exchange rate is an important part of the pricing formula, adding the BDCs are, “really suffering and the industry exposure to banks, stands at some $1 billion.”
A default risk, he said, poses a systemic risk to the entire financial sector all because of the BDCs failure to realize full sale proceeds due to the under recoveries poses a general risk default.
On Tema Oil Refinery (TOR) not being able to work properly, Mr. Horsi, debunked the perception that it was his outfit together with some politicians that were responsible for the state asset not being able to function. He distanced the BDCs from the status of TOR, and added that if he was president, I wouldn’t keep it as it is now”.
There is a disease about government and running businesses”, he said. Until government gets a sustainable business model, Mr. Horsi, believes government had no excuse doing business. The oil sector he said, was a very competitive area, and so there was no way anybody would try to work against TOR, since there is so much space for everyone.
On fears that the BDCs may form a cartel to short change Ghanaians in the wake of the price deregulation, Mr Horsi said, nothing of the sort will happen judging from the way the BDCs operate.
“I don’t think I have any defense to it, really if is a matter of people wanting to know if it’s possible or not. I don’t see cartelization happening at the BDCs level. I think that we are too competitive to cartelize under the current regulator pricing regime.
We are already cutting each other with discounts and credits to oil marketing companies. It just happen that it is not happening at the pump, because the BDCs don’t run the pump”, he said.