Electricity bill subsidies should be more targeted to the needy– ACEP

Electricity bill subsidies should be more targeted to the needy– ACEP

The Africa Centre for Energy Policy has asked government to relook at its latest policy of absorbing electricity bills in efforts to mitigate the impact of COVID-19 on the citizenry, stating that the nature of the policy will not really benefit the poor as intended.

To alleviate the socioeconomic impact of the pandemic, and support particularly the poor and vulnerable, the President had announced that for April to June 2020, government was going to assume the electricity bill of lifeline users- those who consume up to 50kw electricity each month- while other users will have their bills halved.

However, the think-tank in a statement has asserted that not all those captured in the subsidy really need it, adding that the policy would rather worsen sustainability of the country’s heavily indebted power sector now and after the pandemic.

Signed by Benjamin Boakye, Executive Director of ACEP, the statement noted that the power sector is already embedded in debt. For instance, “the current outstanding debt to Independent Power Producers (IPPs) stands in excess of US$1billion,” including other debts and challenges that make it imperative to critically consider including more debts.

Meanwhile, ACEP has calculated the total subsidy for this relief intervention to be about GHS3 billion. “This constitutes about 2.7 billion in tariffs and about GHS300 million in Value Added Tax (VAT),” the statement said. Moreover, these tariffs will later have to be paid to the power sector by government. “If government does not pay, the sector’s liquidity situation will worsen,” Mr Boakye stressed.

For the effect of the policy to be felt, ACEP has advised government to make the ‘lifeline consumption’ free for all. This, the think-tank believes, will ensure that everybody gets the option to enjoy electricity for the most essential purposes.

“Any consumption above lifeline should be paid for by the consumer. The burden on government for this approach will be GHS92 million a month, significantly lower than the GHS1 billion under the proposed policy. This generates a saving of GHS2.1 billion which can be used for other interventions to mitigate the impact of COVID-19,” Ben Boakye explained.

He also wants government to ensure proper targeting of the most vulnerable in society for the intervention by immediately identifying large households in poorer communities that do not benefit from lifeline tariff as they are too many on a single meter.

The think-tank has also urged government to devote a portion of the amount earmarked for the policy to identify and support persons most affected by the Coronavirus such as laid-off staff, commercial drivers and petty traders.

“The GHS2.1 billion is more than enough to provide direct cash transfers of GHS 200 for 3 million impacted citizens for three months. It is therefore pointless to rather target the rich through electricity tariffs,” Mr Boakye added.


Source: Energy Ghana

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