PPPRA Charts Path For Subsidy Reform

The Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley has said sustaining the tempo of reforming the administration of subsidy scheme is germane to the sustainability of the nation’s downstream sector.

Delivering a paper at the just concluded First International Conference on Petroleum Refining and Petrochemicals organised by Petroleum Technology Development Fund (PTDF) in conjunction with the Institute of Petroleum Studies (IPS), University of Port Harcourt at Hotel Presidential Port Harcourt, Stanley said if the deregulation policy was carefully implemented, it would serve as stimulus to economic growth and social wellbeing of the citizenry.

He pointed out that there are abundant opportunities and benefits of deregulation of the down stream sector which  far outweighs the short-run cost of discomfort.

According to him, “there are abounding opportunities namely: serves as incentives to increasing investment inflow based on guaranteed full cost recovery or restitution through the Petroleum Support Fund Scheme; allows effective control over transportation cost as there are no mass transit systems; affords the government the opportunity to effectively monitor and protect the developing economy against the vagaries of the International Petroleum Market; encourages effective regulatory controls to prevent consumers from being shortchanged; and facilitates the development of healthy competition among operators.”

On its potential benefits, the PPPRA boss disclosed that it would create room for investment in additional refineries to meet the increasing domestic demand for petroleum products and for export explaining that the proposed three Greenfield refineries (with a petrochemical plant) which have a total capacity of 300,000bpd would position the nation as a future hub of petroleum products supplier in the West African and Sub-Saharan regions.

He also said as the sector is being deregulated there would be investment opportunities in petroleum products and gas pipelines since the regime would facilitate the operation and management of pipelines and storage of facilities under the open access and common carrier regime.

He further explained that the Petroleum Industry Bill (PIB) recommends the creation of a National Strategic Fuel Resources (NSFR) which will make additional investment in storage facilities nationwide more attractive.

“Investment in alternative sources of energy, example Compressed National Gas (CNG), Liquefied Petroleum Gas (LPG) among others: Biofuel is to be derived from cassava, maize, guinea corn and sugarcane. The initiative on gas utilisation has increased considerably with the launch of LGP/CNG stations in Abuja by NIPCO Plc,” he added.

On the challenges of administering petroleum subsidy scheme he said inappropriate products pricing and price distortions which have resulted to incessant pipeline vandalism, product smuggling, black marketeering, acute fuel shortage have made it impossible for operators to recover cost.

Abuse of fuel subsidy through various malpractices by operators, mechanism for administering fuel subsidy does not guarantee any impact on the lower income section of the economy for which it is intended, it encourages cross border smuggling thus making product cost less in neighbouring countries and waste of limited government revenue were some of the challenges pointed out by the PPPRA boss.

He also noted that deregulation without regulatory controls leads to the development of anti-competitive practices and profiteering by operators as regulators make and implement policies to prevent consumers from being shortchanged and ensure that opertors are adequately restituted and creating a level playing ground for them.

Vivian-Peace Nwinaene