Industrialization Advocate Supports New Energy Sector Levy
As the public debate on the imposition of the new Energy Sector Amended Levy continues to rage after Parliament’s approval of the bill earlier this week, Dr Richard Danso, founder and chief executive of the Alliance for Development & Industrialization, (ADI) has waded into the issue, declaring his full support for the new tax in the light of the financial predicament which the President Mahama administration has inherited and its implications if not resolved.
The new levy, passed into law on Tuesday, June 3, introduces a GHc1 levy on every litre of petroleum products sold in Ghana. The aim is to generate an additional targeted GHc5.7 billion in revenues towards retiring the energy sector’s total indebtedness which stood at US$3.1 billion as the March 2025. Finance Minister Dr Cassiel Ato Forson has explained that a minimum of US$3.7 billion is needed to retire the debt which continues to rise, while an additional US$1.2 billion will be needed to ensure the continuous supply of fuel to Ghana’s thermal power plants throughout this year.
Dr Danso points out that paying a GHc1 levy on each litre of petroleum products out of the effective savings of some GHc4 per litre given consumers by the sharp appreciation of the cedi against the dollar over the past two months is an affordable price to pay for the guarantee of sustained 24-hour electricity supply, which would not happen if the debt is not paid off and companies along the power supply chain are unable to remain in operation generating and distributing electricity.
“All the potential economic gains we are now looking forward to as a country are dependent on our having power to drive our economic activities” Dr Danso asserted in Accra in the wake of the new levy’s Parliamentary approval. “ Without stable electrical power, the economy cannot generate the employment that our youth in particular so direly need and the economy as a whole will not be able to increase the productivity that is requisite if Ghana’s economic performance is to improve on a sustainable basis”
He further pointed out that without regular electricity Ghana cannot produce cost-competitive exports for the international market, which would jeopardize the cedi’s exchange rate against the dollar, which in turn would ultimately eradicate the cedi’s recent appreciation and the consequent cedi-denominated savings consumers are enjoying on the price of petroleum products.
“Really this is common sense” Dr Danso has asserted. “The choice is to pay the GHc1 levy on petroleum products as government asks us to do or allow the electricity sector’s financial unviability to take us back to ‘dumsor’ and then we would end up losing the savings we are enjoying from the cedi’s appreciation which is four times the levy.”
Dr Danso also said that Ghanaians should give their government the benefit of the doubt with regards to its promise to re-fence the revenues generated by the new levy and devote all of them to the stated purpose of paying down the energy sector legacy debt. Indeed, one worry that Ghanaians have expressed relates to the failure of past efforts to defray energy sector financial shortfalls. They point out that ESLA was introduced in 2015 with the promise that it would defray the then-energy debt in five years after which the levy would be terminated.
A decade later, however, it is still being levied but the energy sector debt has risen further rather than fallen.
However, the incumbent government has explained that the predecessor administration imprudently diverted the levy’s proceeds to other purposes, resulting in the current incongruous situation.
Nevertheless, Dr Danso agrees that while the new levy will serve to defray the financial gap currently threatening the sustained supply of electricity in Ghana, its critics are correct in their assertion that this is a stop-gap measure and a more permanent resolution to the problem of the debt build-up needs to be found.
Currently, the energy sector is afflicted by several key shortcomings including a costing structure that does not account for the financing of diesel imports for thermal power generation, energy transmission losses of up to 40% of power generated, inefficient billing by the Electricity Company of Ghana and recently unveiled sheer financial and material malfeasance within the state-owned electricity retailer as well as dubious procurement processes.
Government intends to address these problems by, among other things, bringing private participation into ECG’s metering and bills collection activities – despite pushback by certain vested interest groups – and a greater reliance on cheaper, cleaner gas rather than diesel, for thermal electricity generation.
