Sulemanu Koney

Sulemanu Koney

Mining companies operating in Ghana have disclosed that they spend a princely amount of $5 million monthly on cross-subsidy for the consumption of social fuel (premix fuel) by low-income households in the country.

At the same time, the industry paid ex-refinery price for diesel significantly higher than that of other users of the same product.

The Chief Executive Officer of the Ghana Chamber of Mines, Sulemanu Koney, who is unhappy with these developments in the industry added: ?The energy charge for firms with energy demand similar to the mining companies was 37.03% lower than that paid by mining companies.?

In effect, mining companies cross-subsidize consumption of diesel and electricity for the other users. However, these are not reflected as benefits from the sector in official documentation, such as reports on corporate tax payments, he told members of Journalists for Business Advocacy (JBA) at a day?s workshop held recently in Accra.

The workshop was organized by the JBA, an offshoot of the Ghana Journalists Association (GJA), in collaboration with Ghana Chamber of Mines to update the members of JBA on happenings in the mining sector.

Throwing light on the issues, Mr. Koney emphasised that: ?the mining industry pays a premium for the consumption of diesel. Conventionally, the resulting windfall is used in subsidizing social fuel as premix, which is consumed by low-income households?.

In addition to this incipient tax, the government?s 2015 Budget slapped a 17.5% tax on petroleum products under the Special Petroleum Tax (SPT) Act, 2014 (Act 879).

This, Mr. Koney said, worsened the price differential for the product between the mine and the general consumer from 12% to 19%.

?Given the high volume of diesel consumed by the industry, the impost hiked the operating cost of mining companies deeply and instantaneously.?

For instance, a company which is a member of Ghana Chamber of Mines? annual expenditure on fuel increased by about $100, 000 on the back of the impost.

As well, the deficit in supply of electricity compelled most companies to rely on diesel-propelled generators to augment their load demands, further exacerbating the cost pressure on the industry, according to him.

Estimates from the Chamber suggest that the increase in expenditure on fuel as a result of the SPT will drive the all-in-cost of a typical mine up by $17 per ounce.

Within the context of the bearish commodity prices, especially gold, most mining companies would voluntarily scale down or suspend their operations which would ultimately shrink fiscal outflows from the sector to the state and other beneficiaries.

The Chamber therefore called on the government to relieve the mining sector from the payment of the SPT, not only on account of its significant contribution to the growth of the Ghanaian economy but also due to the premium it pays on diesel.

Source: African Eye


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.