Gov’t Quietly Wooing BDCs to Cut Suppliers’ Premium to Ease Impact of ¢1 Energy Levy – NPA CEO Reveals

As part of efforts to mitigate the potential impact of the newly approved GH¢1 per litre energy sector levy, the Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), Godwin Edudzi Tamakloe, has disclosed that government is quietly engaging Bulk Distribution Companies (BDCs) to help reduce fuel prices at the pump.

The NPA boss reveals that the government is engaged in behind-the-scenes strategy discussions with the BDCs, wooing them to consider reducing their “supplier’s premium”. The suppliers’ premium is a markup they apply to imported fuel products before selling to Oil Marketing Companies (OMCs).

This premium adds to the price build-up of fuel at the various pumps. Edudzi Tamakloe says the government has realised that if it is able to talk the BDCs into reducing their premium, it could possibly lead to price reduction and hence soften the impact of the levy.

In a media interview, the CEO of NPA noted that fuel prices in Ghana are influenced by a complex chain. BDCs import the fuel, adding a supplier’s premium to cover risks and margins. OMCs purchase the fuel from BDCs, then factor in operating costs, taxes, and levies before selling to the public.

Admitting that the new GH¢1 energy sector levy, while necessary to address energy sector debt, adds further pressure on final prices, hence the need to cushion Ghanaians.

By encouraging BDCs to lower their margins, the NPA believes the net impact of the levy can be absorbed more fairly across the value chain, rather than passed directly to consumers.

“If you look at the pricing, there’s something maybe you’ve not averted your mind. The OMCs are buying the product from the BDCs. Now, when the BDCs also bring their imported product, they have what they call their supplier’s premium,” he narrated.

He revealed, “The supplier’s premium that the BDCs sell the product also is another matter that we are also having that conversation quietly with them, so that if the supplier’s premium can be watered down a bit, it will also impact all the others. So we are having that conversation that you may not be aware of, but we are having quietly. So, in fact, we are working behind the scenes to mitigate what the OMCs are doing.”

This attempt signals that, should the efforts of the government be successful, coupled with a stable currency, Ghanaians might not even feel the impact of the new energy sector levy, which has become a subject of controversy in the country.

While the energy sector levy is intended to help pay off legacy debts and support Ghana’s energy infrastructure, the government recognises the need to implement it in a socially responsible way.

By negotiating adjustments to supplier premiums and margins, the state hopes to shield Ghanaians from abrupt fuel price hikes. For now, Ghanaians will just have to pray that the BDCs heed the pleas of the government.

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