Although well-intended, Co-chair of the Ghana Extractive Industries Transparency Initiative (GHEITI) and a policy analyst, Dr. Steve Manteaw, sees that the amendment of the energy sector levy is likely to negatively affect food prices and transport fares.
Dr. Manteaw believes that, by the move, the government is possibly shooting itself in the foot after asking traders to reduce prices.
Turning around to impose a levy on every litre of petrol and diesel, the former chairman of PIAC observes, will likely undermine the government’s own effort to convince traders to cut prices following the appreciation of the cedi.
Parliament, after a proposal by the government through the Minister of Finance on Tuesday, passed an amendment to the energy sector levy. The amendment now imposes a levy of GHC 1 on every litre of petrol and diesel.
The Minister for Finance justifies that the levy is intended to deal with the perennial challenges of the country’s energy sector, especially the intermittent power outages, widely known as “dumsor”.
Impact on Cost of Living
Dr. Manteaw admits that the decision is well-intended, but the levy is likely to cause a chain reaction across the economy from trotro fares to market prices. Transport operators are likely to pass the increase directly to passengers. And when fuel goes up, food doesn’t stay the same.
He therefore sees this as a major contradiction of the government’s own effort to ease the cost-of-living burden on Ghanaians.
“May adversely affect transport fares and food prices, undermining the government’s call on traders to reduce prices,” Dr. Manteaw remarked.
The Fear of Possible Abuse
Another critique of Dr. Manteaw is the seeming lack of a strong mechanism to ensure accountability. He fears the levy may be a subject of abuse, as the country has experienced with some levies in the past being misapplied or misappropriated, ignoring the main reasons for which they were implemented.
He insisted that the policy is “well-intended, but lacks a strong accountability mechanism. This exposes it to potential abuse, including misapplication.”
An Alternative Solution
The extractive industry player did not only criticised the move by the government. He further offers a different route, which he believes will avert the possible impact of the levy.
He calls for a reduction in the proposed levy to 25 pesewas per litre or, better still, calculate it per gallon rather than per litre to cushion consumers from a steep rise in fuel costs.
Moreover, he calls for a sunset clause that will indicate a clear expiration date for the levy so that it doesn’t become a permanent fixture like other “temporary” taxes Ghanaians are still paying decades later.
He says, the levy is “too onerous for consumers if placed on a liter of petroleum products. It should rather be placed on a gallon, or reduced to 25p per liter to moderate its effect on the cost of living. Provide a sunset clause, so that it does not assume a perpetual character, like the TOR debt Recovery Levy.”
The Bigger Picture
Ghana’s energy sector is heavily indebted, with power producers warning of shutdowns if payments delay further. Dumsor, the dreaded power outages, remains a lurking threat. The government insists the new levy is critical to prevent an energy collapse.
But Dr. Manteaw believes this reset does not need to come at the expense of the cost of living for Ghanaians by piling more pressure on the poor. He insists that a revised 25p on a litre or GHC 1 per gallon, in addition to strong transparency and accountability, would have been a better route.
