Former Member of Parliament for Pru East, Dr. Kwabena Donkor, is questioning the continuous existence of the government’s subsidies on premix fuel, arguing that the policy is no longer serving its intended purpose.
The former Minister for Power, now an energy, mining, and corporate governance consultant, says despite the existence of subsidies on the premix fuel intended to make the lives of the fishing communities better, the fisherfolk are no longer benefiting from the policy.
In an exclusive interview with The High Street Journal, Dr. Kwabena Donkor noted that the subsidy scheme has become a vehicle for profiteering, diversion, and inefficiency, hurting the very fishermen it was designed to support.
The Original Intent and Today’s Reality
Subsidies on premix fuel were introduced years ago with the intention of easing the cost burden on fishermen and boat operators and boosting the fishing industry’s contribution to Ghana’s food security and economy.
It is part of the government’s policy to ease the socio-economic burden of fishing communities, who are generally regarded as vulnerable.
For over a decade, the government has borne a significant portion of the fuel cost, paying for the difference from the price stabilization levy on fuel prices.
Dr. Donkor reveals according to the current pricing of fuel prices, a litre of premix fuel is pegged at GHC 5.35. This is a result of a direct subsidy of GHC4.15. This means that, in the absence of the subsidy, fisherfolks would have bought the fuel at a market price of GHC 9.50.
However, Dr. Donkor laments that this well-meaning policy has now become a source of hardship for fisherfolk, particularly in areas around the Volta Lake such as Sene East and West, Pru East and West, Krachi East and West, and Kpandai.
Owing to this subsidy, profiteers and middlemen divert the fuel, leading to a scarcity of the product in the fishing communities. This makes the fisherfolk worse off.
“If you go to, especially I’m more conversant with areas around the Volta Lake, Sene East, Sene West, Pru East, Pru West, Kpandai, Krachi, Krachi East, Krachi West, all of us along the Volta Lake, today premix is so scarce that the reality of fishermen and boat operators is that they hardly get 10% of their premix needs met from supplies from the premix secretariat,” he recounted.
The Dangerous Activities of Profiteers and Middlemen
The major culprits in the nefarious act, Dr. Donkor argues, are middlemen and some profiteers who find the diversion very lucrative, hence engaged in rent seeking. These middlemen divert subsidized premix fuel for resale to be used for adulteration of petrol.
The energy expert says the price differential, 5.35 cedis per litre for premix versus over 13 cedis for petrol, creates an irresistible rent-seeking incentive.
“The premix meant to go to fishermen and boat operators gets diverted in Accra and Tema, and it goes into adulteration of petrol. They just dump it into petrol dumps to increase the quantum because of the price differential, for example, if subsidised premix is 5.35 cedis per litre. If you go to the Goil fuelling station today, a litre of petrol is 13.27 cedis. So, look at the huge price differential. And so there is the opportunity for people to divert premix meant for fishermen into pumps, into tanks for customers to buy. So they make a super profit,” he revealed.
Despite measures such as product marking and vehicle trackers, enforcement has failed due to the vast rent margins involved. According to Dr. Donkor, this rent has made it nearly impossible to effectively police the system.
The Woes of the Fisherfolk Due to Scarcity of Premix
Due to the scarcity of the premix fuel, the fishing community is resorting to a more expensive alternative to fuel their boats.
The common practice now, Dr. Donkor revealed, is to purchase regular RON 91 petrol at market prices (13.27 cedis per litre) and “downgrade” it with engine oil. This process, Dr. Donkor finds, to be highly economically draining.
For every 25 litres of RON 91 petrol, fishermen spend an additional 60 cedis on a quarter gallon of engine oil in Yeji, pushing the effective cost per litre to 15.67 cedis.
“A litre of RON 91 petrol at the Goil filling station costs 13.27 cedis. They now have to buy a quarter gallon of engine oil. A quarter gallon of engine oil to downgrade 25 litres of petrol. A quarter gallon of engine oil in Yeji costs 60 cedis. So if you add the quarter gallon of engine oil to the 25 litres, a litre ends up costing 15.67 cedis,” he narrated.
He therefore noted that, “If there were no subsidy, a litre of premix would cost 9.51 cedis, full cost recovery. Compared to 13.27cedis. the gap is not big enough to warrant the risk involving diversion.”
A Better Way Forward: Remove Subsidy, Reinvest Savings
Dr. Donkor’s solution is both bold and practical. He is calling on the government to abolish the premix subsidy entirely and redirect the estimated annual savings of GHS 240 million to more targeted interventions that directly benefit fishing communities.
He maintains that if the subsidy is removed, the full cost of premix will be at GHC 9.51 lower than what they pay now to get the downgraded fuel due to the scarcity. He adds that the removal of the subsidy for full cost recovery will be a disincentive to the middlemen and profiteers who divert the premix for petrol adulteration.
“My call is simple. Take away the subsidy. Let fishermen buy the premix at full cost recovery, which will still be lower than what they are buying now, and which will still be lower than the premium, RON 91. The state will save about GHC 240 million year that the state pays on subsidies,” he proposed.
Instead of the subsidy system that enables corruption, Dr. Donkor further tells The High Street Journal that as an aspect of the interventions for the fishing community, the government can rather zero-rate the 5% import duty on fishing nets, which would cost the state no more than GHS 50 million annually.
He also proposes that the government electrify fishing villages along the Volta Lake and coastal belts using non-grid solar systems, improving quality of life and productivity.
To him, these are tangible supports that reach the people directly. They reduce production costs, improve welfare, and eliminate the black-market premium the fishermen are currently paying.
The Bottomline
Dr. Kwabena Donkor’s advocacy for the scraping of premix fuel, he says, is not a call to abandon fisherfolk. It is a win-win situation that will benefit both the government and the fishing communities instead of the unscrupulous profiteers.
He believes the implementation of this proposal will be easier if the government actively engages all stakeholders within the fishing value chain.
Dr. Kwabena Donkor says the subsidy has outlived its usefulness, and it is time for the government to scrap it and redirect the funds to truly empower our fishing folk.
