NPA Exploits Petroleum Consumers with Inflated UPPF Charges - Onlinetimesgh

NPA Exploits Petroleum Consumers with Inflated UPPF Charges

The Centre for Environmental Management and Sustainable Energy (CEMSE), has allegedly indicated that, the National Petroleum Authority (NPA) is using the Unified Petroleum Price Fund (UPPF) as a mechanism to collect surplus revenue at the expense of consumers.

The National Petroleum Authority (Act 691), which established the UPPF under Section 62, aimed to guarantee a steady supply and effective distribution of petroleum products, taking into account transportation expenses in the pricing.

“The sources of revenue for the fund are the differential between the UPPF margin in the Price Build Up (PBU) and actual cost of freight of each oil marketing company. The current price of the UPPF is 90 pesewas per litre an increment of about 300% since January 2022. The threshold for determining the allowable kilometres within the UPPF margin is periodically reviewed by the UPPF committee. The threshold ranges from 1km to 530km where a full trip of 530km exhausts the 90 pesewas per litre.”

“Although the true intention of the UPPF was to help distribute petroleum products to rural Ghana, it has become an avenue for the NPA to mobilise unneeded revenue, and this reduces consumer welfare because the consumer over pays for transport on petroleum products in Ghana.”

CEMSE further reveals significant overcharges in transportation costs. While transporting a litre of petroleum within a 66 km radius should cost 17 pesewas, the current UPPF rate is set at 90 pesewas per litre. This discrepancy means the NPA collects an additional 73 pesewas per litre. Given that 60% of petroleum is distributed within this range, consumers in Greater Accra, Greater Kumasi, and the Western Region overpay, contributing approximately GHS 1.7 billion annually to the NPA.

“The cost of transporting a litre of petroleum products from 1km to 66km is 17 pesewas per litre and this must be paid to the transporter. At the current UPPF of 90 pesewas per litre the NPA makes 73 per litre on each litre of petroleum products distributed within the Greater Accra and Greater Kumasi area as well as Western Region.

According the regional supply of petroleum products for 2023 published by the NPA, about 60% of the products are distributed within the 66km allowable threshold and for that matter the petroleum user in these regions over pays the transport cost of UPPF by 73 pesewas per litre. In volumes, the NPA makes about Ghc1.7 billion from the petroleum user.”

According to CEMSE, transport owners are also adversely affected. The cost of a Bulk Road Vehicle (BRV) and its accessories is approximately GHS 4.86 million. With limited trips per month, transporters take around 11 years to break even, with vehicle lifespans typically around 12 years.

This financial strain impacts their ability to adequately pay drivers, threatening the sector’s sustainability.

The statement added that, the NPA allocates 25 pesewas per litre from the UPPF for tracking systems, which is outside the fund’s original mandate. This allocation results in an annual cost of GHS 1.2 billion to consumers, benefiting a private company, Enterprise Relational Database Management Software. Concerns have been raised about the legality and effectiveness of such tracking.

“The section 62 that established that UPPF specifically indicated the function of the fund, and tracking the products for government revenue was not part of the functions. However, the NPA uses 25 pesewas per litre of the UPPF to fund tracking of the product which is illegal. The tracker on each vehicle costs around US$3000, and only 25 pesewas per litre on 54,000 litre BRV in four trips a month would pay for the tracker. The tracking costs the petroleum user about Ghc1.2 billion for a tracking that does not solve of unaccounted products or under recordings in the industry. The implication is that a business entity called Enterprise Relational Database Management Software makes about Ghc1.2 billion from petroleum users for no productive work done. While the transport sector with over 2000 BRVs share about Ghc1.036 billion, this company alone rakes about Ghc1.2 billion.”

Despite the UPPF’s objective to maintain uniform petroleum prices nationwide, deregulation since 2015 has led to varied prices set by OMCs based on location and market conditions. This undermines the justification for the UPPF as a tool for price uniformity.

“Prices of petroleum especially petrol and diesel are not uniformed across the country. OMCs have their individual prices across the country. The recent introduction of price floor by the NPA has also introduced a discount regime where OMCs are allowed to differentiate their prices depending on the location and market. For instance, STAR OIL have been seen to vary their prices on their price boards. Therefore, the justification that UPPF is used to keep prices the same across the country is factually inaccurate. Since the deregulation in 2015, prices have never been uniformed across the country.”

CEMSE added that, the NPA’s failure to publicly disclose UPPF accounts, despite legal requirements for quarterly reporting, raises transparency and accountability concerns. As the UPPF is funded by consumer payments, there is a need for clear communication about its revenue and expenditure.

“The NPA law mandates the UPPF coordinator on quarterly basis the UPPF report to the NPA Board. However, the inability of the Board to disclose the account of the fund to the public annually exhibits lack of transparency and dishonesty in the usage of the fund. The reason for this position is because the UPPF is paid by the petroleum user and for that matter must be informed about how the fund is being used. Article 899 or Article 1064 have sections that makes sure that government communicates revenue realized and utilized in the levies.”

Attached below is the full statement:

CEMSE position on UPPF

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