New levy on LPG withdrawn – Energy Minister

The Cylinder Recirculation Recovery Margin which was expected to allow LPG operators charge 13.5 pesewas for each kilogram of LPG has been withdrawn.

The Minister of Energy, Peter Amewu disclosed this at a press briefing today, Thursday, April 16, 2020.

“That slight increase in price that you saw in the papers, it has been withdrawn. The recirculation module, I think as you are all aware was a very noble thing introduced by the government. That amount you saw was supposed to level up the prices. It has been withdrawn,” he said.

The Minister said government will subsequently decide on the way forward in relation to the levy after a careful review by Cabinet.

Chamber of Petroleum Consumers, CPA suit 

The Chamber of Petroleum Consumers and the Consumer Protection Agency had sued the National Petroleum Authority (NPA) over the introduction of the Cylinder Recirculation Recovery Margin.

The two companies in their writ of summons argued among others that the NPA failed to consult with various stakeholders before introducing the policy.

“Plaintiffs state that the failure of the 1st defendant to consult with the service providers before the introduction of the new petroleum pricing formula has led to agitations among such service providers, particularly, the LPG Marketing Companies Association of Ghana (LPGMCs) who have issued a statement calling on the 1st defendant to withdraw the CRM.”

Purpose of Cylinder Recirculation Model

The NPA on Wednesday, April 1, 2020, directed industry players to begin charging 13.5 pesewas on each kilogram of LPG.

It also instructed Oil Marketing Companies (OMCs) to increase the levy on Fuel Marking Margin from three pesewas to 4.5 pesewas per litre on every product.

The NPA explained that the introduction of the Cylinder Recirculation Recovery Margin was aimed at supporting stakeholders in the supply chain ahead of the implementation of the Cylinder Recirculation Model.

Although the NPA justified the move, some industry watchers have however said that both directives are unlawful and must be withdrawn with immediate effect given the impact it will have on the business.

NPA in its release issued on Friday, April 4, 2020, maintained that such calls are unfortunate because its projection rather shows that for this very pricing window (1st April to 15 April, 2020), consumers are expected to enjoy a price reduction of about 11.56 percent even with the introduction of the Cylinder Recovery Margin.

“The attention of the National Petroleum Authority (NPA) has been drawn to a statement issued by the LPG Marketing Companies Association of Ghana (LPGMCs) on the above subject, dated April 3, 2020, calling for the withdrawal of GHp 13.5 Cylinder Recovery Margin which took effect on April 1, 2020. We wish to state categorically that, contrary to their claim that the introduction of the margin will increase the product price at the pumps and thereby burden the consumer, the facts as they stand do not support that.”

“The margin is, therefore, to assist the marketers to offset some of their financial expenses, in accordance with the full cost recovery principle of petroleum products pricing in Ghana. It is therefore unfortunate for the LPGMCs to hold such a position”, it added.

The NPA had said it will continue to engage with stakeholders over concerns raised regarding tax components on LPG.

“We are certainly aware of the difficult situation we all find ourselves in at this time, and the last thing we will do is to further burden the consumer with additional taxes. The NPA would, therefore, like to assure members of the general public of our commitment to ensure product availability, affordability, and accessibility, while ensuring the safety of the general public and the business viability of players across the value chain”, the statement concluded.

Source: Citi