Bring back Automatic Adjustment Formula -- AGI

The Association of Ghana Industries (AGI) has asked government to revert to the Automatic Adjustment system in fuel pricing that makes way for periodic reviews and for effective planning.

The Association said it has noted with concern the timing of the recent fuel price increment that is impacting seriously on business.

“AGI is of the view that fuel price reviews must be made amenable to the Automatic Adjustment system that allows periodic price reviews, for effective planning.” 

For the first half of 2012, the cedi depreciated by about 20% while crude oil prices on the world market averaged an increase of about 8%. Fuel prices should have been reviewed accordingly, a release from the Association said.

“We note the challenges associated with implementing the Automatic Adjustment System when such unexpected changes occur in the determinants of fuel price review -- namely the exchange rate and world crude oil price. We urge Government to develop a system to manage such challenges. In this regard, AGI recommends effective implementation of risk management strategies such as hedging to deal with such situations.”  

Government, the AGI said, ought to make provisions in the National budget for the fuel subsidies for effective planning; and should submit a supplementary budget to cover any unplanned additional subsidies on account of significant changes in the price determinants. 

AGI is therefore calling on Government to: 

Reinstitute the periodic review of fuel pricing to mitigate the huge impact of such fuel price increments. 

Budget for any fuel subsidy before it is absorbed. This should be part of the Budget Statement and Economic Policy presented by the Ministry of Finance. This will enable control and prudent financial management.

Seek parliamentary approval, if it becomes necessary to exceed such budgetary allocations.  

Fix the Tema Oil Refinery, as soon as possible to ensure the continuous supply of finished products including residual fuel oil to Industry, among others. In addition, we would be adding value to crude oil -- thereby generating industrial growth and saving forex.