Sunday, 30 June 2019

Gov’t disregarding PRMA and other financial laws



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Adnan Adams Mohammed

The Finance Ministry has been accused of showing gross disregard to the petroleum laws and acts governing the oil revenue management for compelling Ghana National Petroleum Corporation (GNPC) to cancel US$50 million debt owed by the ministry to the Corporation.

The 2018 Public Interest and Accountability Committee (PIAC) report, reports that the Finance Ministry in 2014 withheld the said amount and had since not released the money to GNPC, but surprisingly, the Finance Ministry is compelling GNPC to expunge the debt from its books as a loan.

Again, the transaction was not supported by any form of agreement detailing the terms of the loan and a repayment plan.PIAC is therefore calling on Parliament to consider reviewing the situation where a law, and in this case the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), is used to override provisions in existing laws without repealing relevant sections of those laws, when in the hierarchy of laws, all Acts of Parliament are supposed to have equal standing.

“The use of one law (the Earmarked Funds Capping and Realignment Act) to over-ride the provisions of another Act (the Petroleum Revenue Management Act), without repealing the applicable sections of the latter, raises questions bordering on the legality of the Ministry’s actions”, Chairman of PIAC, Dr Steve Manteaw has said.

Details of the supposed inappropriate conduct of government through the Ministry of Finance was narrated by PIAC as that; “GNPC, on September 7th, 2018, reported that the Ministry wrote to inform the Independent Administrator preparing the Ghana 2016 EITI Report (with the Corporation in copy) that, provision had been made in the 2019 Budget for the settlement of the advance.

“The Corporation further reports that, on December 15th 2018, another letter was received from the Ministry asserting that per the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), the Minister for Finance is empowered to cap all earmarked funds at 25% per annum. The government indicated in a communication that, it has not retained the Corporation’s flows thus far with the view to offsetting the US$50 million advance with part of the capped amount of GHC1.001 billion, and that, the Corporation should expunge the US$50 million advance from its books.”

The Committee also observes that, with the situation where GNPC’s funds are currently capped at 30% of net petroleum revenues, a further 25% cap of the 30% using Act 947, reduces GNPC’s funds to a mere 7.5% and with GNPC expected to wean itself off the Petroleum Holding Funds (PHF) by 2026, GNPC lurks in financial suffocation to execute its legal mandates.

Apart from the unpaid US$50 million loan, an amount of US$4.14 million, representing 1% of total receipts, used to support the construction of the Western Corridor Roads is not yet paid. The money was requested from GNPC by the government to assist the construction of key roads within the Western Corridor financially, in order to facilitate the evacuation of gas from the Ghana Gas Company at Atuabo.

GNPC spent US$3.8 million on the secretariat activities of Ghana – La Cote d’Ivoire Maritime Boundary Dispute which is still not been refunded to GNPC. PIACis thereby calling on government to refund the US$3.8 million to GNPC on the grounds that, the Ghana Boundary Commission established by the State to deal with such matters must have a fully functioning Secretariat and made to handle its own budget

Also, in 2018, GNGC received raw gas worth $85,214,825.34 from GNPC during the year, for which payment is outstanding. Total GNGC indebtedness to GNPC currently stands at $315,530,008.87 as at the end of 2018.

GNGC’s income from the sale of lean gas, LPG, and condensates for the period was $224,704,210.61, of which only $85,211,856.99 was paid.GNGC made no attempt to defray part of its debt to GNPC, even though the Company received revenue for the period under review.
GNPC and the ABFA received US$305.27 million (31%) and US$235.10 million (24%) respectively of PHF allocations for the year 2018.

Ghana National Gas Company (GNGC) was established as a commercial entity to enter into a business arrangement with GNPC to take the raw gas, add value, sell it, make a profit and pay back GNPC.

The report said, the vicious political interference in GNPC’s affairs and the tendency to use it to finance quasi-fiscal expenditure, if not checked by Parliament, will undermine the Corporation’s operational efficiency and threaten its sustainability.

While the Committee is satisfied with the quality of spending by the Foundation, it recommends to Parliament, to consider placing some restrictions on the proportion of GNPC’s budget that can be channeled into Corporate Social Investment to forestall any future excessive expenditure in this category.

Natural Resource Economist, Gideon Ofosu-Peasah, has said that in the face of the current spending by GNPC for the quasi-fiscal expenditure of the government should be a cap on the spending on corporate social investments.

“The focus of the business should not only be focused on its core mandate. It should also be concerned about its environment and society as well. If that will derail you from your core mandate then there should be a cap”.

Ghana National Petroleum Corporation (GNPC) was established in 1983 and started operations in 1985 to support the Government's objective of providing an adequate and reliable supply of petroleum products and reducing the country's dependence on crude oil imports through the development of the country's own petroleum resources.

In addition to the functions of petroleum exploration, development, production and disposal activities, the Corporation assumed responsibility for the importation of crude oil and petroleum products to meet national demand.

GNPC is Ghana's national oil company mandated to explore on its own or partner all contractors in the exploration and production of petroleum in Ghana.

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