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Energy sector players welcome GNPC budget cut by 10%

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Adnan Adams Mohammed

The Ghana National Petroleum Corporation’s (GNPC) 2019 expenditure budget has been cut by ten percent (10%) by Parliament after scrutiny.

Amount cut was in value of US$80 million from the total budgeted amount of US$800 million to implement the Corporation’s work plan for 2019. “There was no justification for some of the projects captured in the 2019 budget of the GNPC, Ranking Member of the Select Committee on Energy, Adam Mutawakilu has said.

The cut in GNPC’s budget for the year has been welcomed by industry watchers who had earlier criticized some of the expenditure items captured in the work plan. However, the industry watchers want an explanation on how the cut of US$80 million was arrived at.

“This is great but we need to see the details of the budget to see whether the amount reduced is significant or not. There was a lot of waste in the GNPC’s budget and that was why we raised issues with the budget they presented to parliament,” the Executive Director of Energy think tank, African Centre for Energy Policy (ACEP), Mr Benjamin Boakye has said.

The Parliament Select Committee on Energy also questioned the US$50 million  the Corporation is requesting to use for the building of a refinery, as parts of government’s plans to create a Petroleum hub in the country.

The Corporation also plans to spend some US$43 million on various projects as part of its Corporate Social Responsibility in 2019. Some of the projects include the building of boreholes and educational scholarships for persons within the communities the company operates.

But, industry watchers say the US$43 million for CSR is on the high side compared to the US$20 million the company plans to spend on its core operations including the development of the Volta Basin.

The Institute of Fiscal Studies thereby wants Parliament to place a cap on GNPC’ budget for CSR.

Also, ACEP noted that GNPC in recent times has become more popular in delivering development projects rather than its core mandate.

“While GNPC, like any corporate entity, has a responsibility towards society, it is unusual for sound corporate organisations to spend more than 10% of its cash flow (not profit) on corporate social responsibility. The Corporation’s CSR expenditure becomes more profound when its CSR budget is compared with the budget of some critical ministries.”

In 2018, the corporation spent US$28 million on CSR which is more than the US$25 million it spent on salaries and US$17 million it spent on some operational activities.

“The GNPC must prove beyond every reasonable doubt what the funds are going to be used for. We scrutinized every project. And from here the committee will be going on the field to check and ask all the relevant questions,” Mr. Mutawakilu said at a panel discussion on the management of Petroleum funds which was organised by the Institute of Fiscal Studies (IFS).

In response, the GNPC refuted claims it is overspending. General Manager of Sustainability Development at GNPC, Dr. Kwame Baah Nuakoh explain that, those projects are long term investments.

“We invest in the community we operate in. We build their capacity to prepare them for the market so that by the next 15 years they can take up key jobs in the Petroleum sector.”

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