The Ghana Government has bowed to intense pressure by organised labour to reduce electricity tariffs by effecting a 25% cut in rates announced by the Public Utilities Regulatory Commission (PURC) to avoid a nationwide strike called by labour for 18 Nov.
A communiqué signed by a deputy Minister of Information and Media Relations, Felix Kwakye Ofosu, on Sunday said the 78.9% increase announced by PURC had been reduced to 59.18%.
“The action by Government will translate into a subsidy of over 400 million Ghana cedis (about US$190 million) to be paid to the utility companies to maintain a steady supply of energy,” the communique said.
It said this formed part of measures taken by government to cushion the effects of the utility tariff increases on consumers.
“The starting point of the electricity tariff increase towards full cost recovery has been reduced by 25%. That means the starting point towards the full cost recovery reduces from 78.9% to 59.18% with effect from 1st October 2013.
“While the full recoverable tariff at the present time amounts to 120% increase, Government has accepted the recovery to be implemented over a schedule using the automatic adjustment formula,” the communique added.
The communiqué said the decision was taken following a review of the report of the Technical Working Group that was tasked to study the new utility tariffs announced by the PURC.
Government has also asked the PURC to start the implementation of the Automatic Tariff Adjustment Formula (ATAF) from January 2014.
The Technical Working Group had warned that a reduction of the tariff to less that 60% would mean a huge subsidy by government and also have effect on the power companies that could lead to rationing of power.
The new electricity and water tariffs have brought about a strain in the relations between the government and labour, with the country on the verge of coordinated demonstrations in all the regions, culminating in a general strike on 18 Nov.
It is not clear what the reaction of organised labour will be to the government’s gesture.
Labour is demanding a reduction of the increase to one-third and the spreading of the rest over an agreed period.