Proceeds accrued from the Energy Sector Levies Act (ESLA), a levy imposed by the government for the purpose of resolving energy sector debts and supporting energy sector projects totaled GHS1.15 billion during the first half of the year.
According to the Bank of Ghana’s (BoG) fiscal development report, the proceeds reflected a 28.2 per cent shortfall of the targeted amount (GHS1.61 billion). This outcome was realized as a result of the decline in demand for petroleum products below expectation during the period.
Furthermore, the total ESLA proceeds also reflect the introduction of the new levies (GHp20 per litre of petrol and diesel and GHp8 per kg for Liquefied Petroleum Gas) presented earlier this year as captured in the 2021 budget in April.
Out of the total amount realized in the review period, ESLA transfers amounted to GHS1.03 billion, lower than the expected target of GHS1.49 billion, representing an outturn of 68 per cent.
The petroleum levies that are captured as part of the ESLA proceeds are projected to amount to GHS4.93 billion in 2021 whereas the electricity levies (Public Lighting Levy and National Electrification Scheme Levy) are expected to total GHS344.85 million in 2021.
With petroleum levies making up or accruing the larger proceeds compared to the electricity levies, the government projects that total revenues from this component will amount to GHS7 billion by 2024. And a corresponding GHS428.8 million is expected to accrue for electricity levies in 2024. Cumulatively, the petroleum levies and electricity levies are expected to grow by 18.0 per cent per annum.
Medium-term projection of ESLA proceeds
Medium-term projection of the ESLA proceeds from 2021-2024 indicate that it will increase by 12 per cent per annum.
Compared with the 2020 forecast (GHS4.4 billion), projection for 2021 is estimated to increase by GH¢ 634.77 million (12.0 percent). The 2021 forecast is expected to reach GHS5.3 billion and consequently expected to rise to GHS7.43 billion in 2024.
Despite the impact of the Covid-19 pandemic in 2020, expected petroleum levies outperformed the target by 7 per cent. However, electricity levies where impacted adversely due to the slowdown of business activities and lower recovery of electricity bills.
According to the report, expectations are that the positive growth forecast will impact on the operations of the energy sector. This is hinged on the fact that revenues that are generated will be used to address the challenges facing the sector. It is also expected to support the Road Fund and Energy Commission in delivering on their mandate.
During the first half of 2021, the proceeds from the Road Fund levy amounted to GHS453.4 million, representing a 15.4 per cent below the target of GHS536.2 million during the period.
Similarly, for the full year, the projected amount expected from the Road Fund Levy is GHS1.97 billion. Proceeds from the Road Fund Levy is expected to rise to GHS2.23 billion in 2022, GHS2.52 billion in 2023 and GHS2.85 billion in 2024.
The proper management of the ESLA funds are pivotal to the performance of the energy sector. This includes sustainable investments in the sector, debt repayments and provision of efficient power supply among others. While these levies come at a cost to the tax payer, they must be suitably utilized to ensure that the citizens are the ultimate beneficiaries.
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