57 LPG. The last large price increases in July 2014 saw prices of most fuels rise by between 22 percent and 27 percent, except for fuel oil and LPG, the prices of which rose by 16 percent (http://www.npa.gov.gh).

The government’s inability to reimburse bulk oil distributors on time for subsidies has resulted in cash flow problems and their inability to import sufficient petroleum products, causing serious fuel shortages. Fuel shortages were reported in June 2014, and again in September 2014 (Reuters 2014a; _Business World Ghana_ 2014).

A cross‐subsidy levy of 0.05 cedis (US$0.01) per liter of gasoline were charged for years, with negative levies for all other fuels. The positive levy on gasoline was nowhere near sufficient to cross‐subsidize all other fuels. For example, in 2014, the net revenue for the government from cross‐subsidy levies was ‐ 28.5 million cedis (‐US$7.5 million), with LPG and diesel dominating the losses (Table 11).

**Table 11: Net impact of cross‐subsidies in Ghana**

|Item|Gasoline|Kerosene|Diesel|LM diesel|Fuel oil|LPG|Premix|
|---|---|---|---|---|---|---|---|
|Cross‐subsidy|50.000|‐48.449|‐26.987|‐62.287|‐13.937|‐184.042|‐3.608|
|Consumption|1,479,707|164,373|1,685,868|63,552|26,947|241,548|75,501|
|Revenue|74.0|‐8.0|‐45.5|‐4.0|‐0.4|‐44.5|‐0.3|

_Source:_ World Bank staff calculations based on the data posted at <u>http://npa.gov.gh.</u> _Notes_ : Cross‐subsidies are in cedis per kiloliter except cedis/tonne for LPG. Consumption is taken from the statistics for Jan–Sep 2014 and is in kiloliters except for LPG, which is in tonnes. Revenue is in millions of cedis. Premix is a fuel for fishing. LM = local marine.

Illegal diversion of premix, a heavily subsidized fuel for fishing, has been problematic for decades. Premix fuel is gasoline with low octane and is exempt from a special petroleum tax of 17.5 percent applied to all other fuels except fuel oil, as well as the excise duty, the refinery debt recovery levy, and several other charges. Its ex‐refinery price, before any taxes and charges, was half of that of gasoline before the price of gasoline was deregulated. For many years, the price of gasoline has been double— and between 2011 and 2013 even triple or quadruple—the price of premix fuel, creating enormous scope for commercial malpractice and illegal gains. The government, in announcing the establishment of the National Premix Committee, summarized the situation at the end of 2008 as follows (MFA undated):

- Points of sale for premix proliferated, increasing from 128 in 2001 to about 900 in 2008.

- Corruption related to the administration of premix fuel became “uncontrollable,” with rampant diversion to illegal markets. Adulteration of automotive gasoline with premix was financially attractive but damaging to vehicles.

- Eligible purchasers of premix faced serious shortages.

As of 2015, the price difference between gasoline and premix was a factor of two. Commercial malpractice has not only continued, but National Premix Committee members have even been accused of participating in illegal diversion of premix fuel and making financial gains, leading the central regional wing of the ruling party to appeal to the president to dissolve all premix committees (GhanaWeb 2015a).

In June 2015, the National Petroleum Authority announced that it would deregulate petroleum product prices, with the exception of premix fuel and residual fuel oil. The announcement stated that the debt to bulk oil distribution companies stood at more than “$800 million”. There were 27 bulk distribution