The Africa Centre for Energy Policy (ACEP), an energy think tank in the Republic of Ghana is convinced that President Akufo-Addo’s decision to subsidize electricity tariff could worsen the challenges facing the West African nation’s power sector.
According to ACEP, although the move is “well-intentioned to support Ghanaians, particularly the poor and vulnerable”, it argued that it could “endanger the sustainability of the power sector.”
The energy think tank argued that further pointed out that the tariff is highly regressive and poorly redistributes national resources in favour of the rich.
“The challenge Ghana has had with electricity subsidy for the vulnerable in society is poor targeting. A large proportion of households described by the president as ‘the poorest of the poor’ do not benefit from lower lifeline tariffs because many of them live in compound houses.”
“These people consume higher than the base unit of 50kwh a month, rendering the poor unable to enjoy the lifeline tariff. Rather, consumers who are able to procure separate meters and stay within the 50kw consumption band, typically not the poor, benefit from the lifeline tariff,” ACEP argued in a statement copied to energynewsafrica.com.
President Akufo-Addo announced last week that government will fully bear the cost of electricity for all lifeline consumers in the country for April, May and June 2020 as the part of measures introduced by government to mitigate the impact of the novel coronavirus disease on Ghanaians.
He added that commercial consumers will also enjoy a 50 percent reduction in the cost of electricity for the same period.
However, ACEP believes the move could hurt the country’s power sector.
The energy think tank thus urged government to scrap to the 50% reduction in electricity tariffs for commercial consumers but said government could maintain free electricity for lifeline consumers.
“Make lifeline consumption free for everyone. This ensures that at least everybody has 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,” ACEP added.
Statement-on-Electricity-Subsidy
Source:www.energynewsafrica.com