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Govt completes legacy debt repayments to BDCs

Government has made huge progress towards paying off its legacy debt to Bulk Distribution Companies (BDCs), with the payment of all outstanding principal sums of US$427.11 million along with the validation of the component interest outstanding.

The total principal amount of US$806.25 million in debt to importing BDCs was incurred by government through its petroleum products price subsidy policy between 2011 and 2015.

In all, a total of US$929.58 million has been paid between 2011 and September 2019 with a total of just US$52.62 million outstanding as at end of 2018 which is expected to be paid before the end of 2019.

This is according to the 2018 report which was released last week by the Chamber of Bulk Oil Distributors (CBOD). Stakeholders unanimously agree this is commendable with government moving to create a conducive environment for BDCs through the payment of its legacy debts.

Key issues highlighted in the report include fuel quality policy, license rationalization, Health, Safety, Security and Environment policy, Ghanaian content and Ghanaian participation policy.

The report also talks about steps taken by the National Petroleum Authority (NPA), to address fuel smuggling in the downstream petroleum sector.

On the issue of LPG policy intervention, the report projects disruption in the LPG market structure.

“The report anticipates the likelihood of an upward pressure on pre-tax prices of LPG and disruptions in the marketing and retailing structure of the LPG industry.

It also projects significant disruptions in the retail market structure for LPG. The LPG Marketing Companies’ (LPGMCs) dominance of the market (62 percent share) is expected to be threatened by the more consumer-friendly Oil Marketing Companies (OMCs) (38 percent share) who are generally more accessible by virtue of their wider retail sales networks which significantly out-number the LPG outlets by a ratio of about 5:1.

Again, the report also called on LPGMC’s to invest in consumer friendly outlets which need to improve their business interface with potential customers.

“It may be necessary that LPGMCs swiftly invest in multiple consumer friendly outlets, like self-service propane outlets in the US which are operated at supermarkets, and develop a delivery-to-consumer option to stand a fighting chance of maintaining their market share.” the report said.

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