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22nd of July 2018

Economy



Fuel Smuggling Checks Along Coastline Should Be Intensified

The Africa Centre for Energy Policy (ACEP) has noted that government's projection to collect GH¢5.2 billion in 2018 in taxes and revenues from the downstream petroleum sector can be missed if it is unable to deal with the challenge of fuel smuggling which is growing at an alarming rate.

Players in the industry say fuel smuggling has been hurting the bottom-line of businesses, as well as government revenue for the past two years.

According to the ACEP Radar, which made this known, Bulk Oil Distribution Companies (BDCs) and Oil Marketing Companies (OMCs) have been at the forefront of discussions to push state agencies to stop the illegal practice.

ACEP's analysis shows that in both 2016 and 2017, there was 10% decline in the consumption of the two major petroleum products sold at the pump; the worse ever in the history of domestic petroleum products (Premium and gas oil) consumption since 1999.

It said in 2017 government revenue from the sector reached GH¢4.7 billion.

This comprised road fund levy, Energy Sector Levies (ESLA), Energy Fund Levy and the Special Petroleum Tax (SPT).

The outturn for 2017 represents 5% decline in the projections for the year even though oil prices were more favorable to have influenced the SPT to bring in more than the expected revenue.

In 2016, premium and gas oil consumption levels declined by about 330 million liters from projections for that year.

By the end of 2017, the total decline in the consumption growth trajectory prior to 2015 reached 1 billion liters.

“ACEP estimates that the deviation represents a revenue shortfall of GH¢1.5 billion in potential revenue to the state for 2017 alone for the two products sold at the pump. The scale of the revenue loss requires immediate governmental intervention to plug the leakages through the borders.

“In recent times actions by the National Petroleum Authority and the Security Agencies resulted in the arrest of some smugglers on the high seas. However, ACEP is reliably informed that smuggling is still happening. What is even alarming is that fact that the illegal trade is spreading along the entire coastline of the country.”

It revealed that the consequence of fuel smuggling went beyond indirect tax revenue loss to the state.

“Licensed industry players who have made investment decisions based on market information may miss expected outturns due to market distortions. Consequently, corporate taxes to the state will be impacted negatively, as businesses struggle to sustain profitability. The risk to the banks cannot also be understated. It compromises monitoring of product standards to protect consumers from off-spec products.”

ACEP, therefore, recommended that the collaboration to deal with the canker should extend beyond state agencies to activate public participation through whistle blower actions with incentives that encourage people to report fuel smuggling to the NPA, GRA and other relevant authorities.

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