A Case for VRA
The Ghana Water Company Limited (GWCL) and Electricity Company Ghana (ECG) have called for astronomical increases in tariffs.
While Ghana Water is calling for 334% increment in tariffs, ECG is going for a modest 148% increase. This means that where the average Ghanaian struggles before paying GH¢20.00 a month for water and another GH¢20.00 a month for electricity, if he must enjoy the same unit of these utilities, then he must go wherever to find GH¢86.80 for water and GH¢49.60for electricity. What a month that will be!
He who gets paid GH¢500.00, must pay GH¢50.00 for tithes, GH¢100.00 for offertory and special donations in church for the month, GH¢136.40 for water and electricity and suddenly over half his take-home pay is gone. With GH¢213.20 in hand, he has to perform magic to be able to settlecost of transportation, and other essential demands. If he is able to have GH¢1.00 as cash in hand at the end of the month then either he is highly favoured by God, he is a magician or he is a plain-cloth crook.
With this the question is, are the major utility providers justified in demanding such huge increments? In the wave of global economic breakdown which has resulted in hardships and worsening conditions of life, globally, with the United Kingdom (UK) for example, where the average man can no hardily afford a single full square meal a day, why should Ghana Water and ECG just get up and decide they will take more than their fare share in tariff increments? Mind you, government of Ghana only asks for 1.50% in financial transfers and this noble idea has been so much demonised by the opposition that almost every Ghanaian cries out loud when a few cedis are deducted from their MoMo accounts whenever they transfer peanuts to love ones and creditors.
On the issue with the electricity power producers; when the Volta River Authority (VRA) was established and the Akosombo hydroelectric plant became functional and started selling electricity to some neighbouring countries, GoG mandated VRA to solely administer its foreign accounts and for very good reason. As soon as the Authority needs to replace any equipment, it can order its foreign bankers to pay for the equipment from the manufacturers, ship it down to Ghana within a week and debit VRA’s foreign account.
This went on successfully and VRA, which was then the only electricity producer, was very efficient on its mandate. From 1965 until the early 80s, no obsolete equipment and machinery was being used in Akosombo.
After the coming of the Provisional National Defence Council (PNDC) in 1981, Ghana’s problems originated. Due to populist mentality, the PNDC, which metamorphosized to NDC, started expanding electricity supplies to every town and village on sight. This put so much stress on the machinery and equipment, but the real problem was just around the corner.
The PNDC directed that all foreign accounts under VRA must be put under the direct control of government. So, it means if the Authority urgently needs a replacement of machinery or equipment it must write to the finance minister and the Governor of Bank of Ghana to justify its request.
As in all situations, there is never any idle money in government coffers. With millions of dollars of VRA money laying there and the government wants money for essential projects, money will be taken from the VRA accounts. Unfortunately, whenever the Authority needs money urgently to buy machinery and equipment and there is no money, it must wait until monies come in. During which time these essentials would start wearing out and cost of production would start going up.
Soon, cost of production keeps zooming up, due to obsolete machines and equipment and coupled with various governments not been able to approve realistic tariffs for full cost recovery, the VRA had to sell electricity at a loss. Example: if cost of producing 1 MWH (megawatt per hour) was GH¢1,000.00, VRA sells for GH¢650.00.
Another area of great loss is on the transmission cables. They are wearing out and literally leaking. For example, when 100mwh is loaded on the cable lines from Akosombo to Tema, only 65mwh will reach the destination. 35mwh gets lost through leakages on the line and not necessarily through power taping.
In my opinion, as much as ECG is asking for 148% hike in tariffs, and this is very much justified, I believe for full cost recovery tariffs, consumers must be asked to pay at least 200% of what they pay now. If this situation is not resolved, in a few years to come, Ghanaians will have no choice than to pay over 300% on their bill.
However, there is no way, Ghanaians can cope with this. Already 20% hike in transport fares is difficult to handle, and now 148% hike in cost of electricity.
The solution lies with government and I will suggest two things, in no particular order. Government must go for loan and use it to change all obsolete machinery and equipment, with brand-new cost-efficient ones. Then all transmission lines must be changed. Everything must be new and very efficient.
And more importantly, VRA must be allowed to solely handle its foreign accounts as before, with government having oversight responsibility over how those accounts are operated.
Anything other than these, ECG’s request must be granted.
Hon Daniel Dugan
The views expressed in this article are the author’s own and do not necessarily reflect The Chronicle’s stance.
