State inistutions overburdens VRA with GH¢250m debt

Posted: February 16, 2010 in Economic Reporting
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The inability of some state-owned institutions to honour their obligations in paying for power services supplied them, has resulted in the accumulation of huge arrears to their service provider, the Volta River Authority (VRA), a situation officials of the Authority say was having a rippling effect on their operations.

Currently, the VRA is overburdened with GH¢250 million, as a result of the huge arrears accumulated over the past forty years by some state institutions, according to officials of the Authority.

This came to the fore, when the Authority on yesterday appeared before the Public Accounts Committee of Parliament, for a public hearing on the audit report of the Auditor-General into the operations of the Authority for the years ended December 31st, 2004 and 2005 respectively.

From the audit report, the Auditor-General observed that as at February 28th 2006, 12 customers out of a total of 22, who were supplied power by the Authority, had an overdue balance, totaling1, ¢450.86 billion (old Ghana Cedis). Out of the said 12 customers, the Auditor-General observed that three had not settled any of their bills for 2005, or the outstanding balances for previous years.

The three, which are all state-owned mining companies, include the Ghana Consolidated Diamonds Limited at Akwatia, which is indebted to the Authority a total amount of ¢29,802,087,965 billion (old Ghana Cedis), whilst the Dunkwa Continental Goldfields owes a total amount of ¢1,703,901,035 (old Ghana Cedis.)

Prestea Gold Resources is also heavily indebted to the Authority to the tune of ¢66,180,835,475 (old Ghana Cedis.)

The overall arrears of these mining companies, popularly referred to as distressed companies, sum up to ¢97,686,824,475 (old Ghana Cedis.)

The management of the Authority attributed the rest of the arrears to various Ministries, Departments and Agencies (MDAs), as well as the Metropolitan, Municipal and District assemblies (MMDAs).

According to the Auditor-General in its report, the situation could impact negatively on the liquidity position of the Authority, and therefore recommended that the Authority review its debt recovery policy, and also adopt a more effective means to reduce the level of customer indebtedness.

It also advised the management to make specific provision for the amounts owed by these three companies, as “payments might be doubtful.”

However, this revelation generated lots of interest by the panel, which probed further to find out what accounted for the huge arrears.

The Committee, in its hearing, cited negligence and ineffectiveness on the part of management of the Authority in recovering the debt, which had been accrued by the aforementioned state organisations, and warned it to put measures in place to recover the said amount.

“If you cannot collect, don’t sell. It is very dangerous to sell to those customers who are not paying,” warned the Albert Kan-Dapaah, Chairman of the Public Accounts Committee and Member of Parliament (MP) for Afigya-Sekyere West.

The Authority, for sometime now, has been pushing for an increase in tariffs by the Public Utility Regulatory Commission (PURC) to enable it carry its operations effectively in order to provide quality services to its clientele.

It cited the continues depreciation of the Cedi against the dollar, and the high cost in buying gas as the bane of its woes, and therefore recommended to the PURC, a hundred percent increase in tariffs.

A member of the panel, Kwaku Agyemang-Manu, MP for Dormaa West, did not take it kindly with the management of the Authority in their quest to seek higher tariffs, since unpaid debts by recalcitrant customers translates into additional charges for good customers.

According to him, the attempt by the Authority to seek higher tariffs was a clear indication of passing onto the consumer, the arrears which had not been settled by the distressed companies.

He said if the Authority had been efficient in collecting its bills, it wouldn’t have recommended to the PURC an increase in its tariff to enable it provide quality service.

“If you were to be very efficient, we wouldn’t be paying such tariffs as electricity bills in the country. You can’t collect your debts, yet you have fixed costs, and you need to cover them. In fact, the good customers are being punished,” he noted.

He however suggested that the Authority sell its debt to a debt collecting institution to enable it balance its sheet.

Though the Acting Chief Executive of the VRA, Kweku Awotwe, expressed worry over the future of the Authority, looking at its current position, he said the increase in tariffs, it was seeking, was justifiable, since “if all the arrears are recovered, it will still not be enough to the cover the cost.”

The VRA, he said, has been facing lots of challenges in the areas of commercial and technical losses over the years, but was happy to have brought the situation to down to an appreciable level.

“Five years ago, our net losses were about 30%, but we’ve been able to bring it down to 18% percent,” he told the Commission.

The Authority, in its response to the outstanding amounts of the three distressed companies, said its management had discussed the issue with the Ministry of Finance, for the government to assume responsibility of the debt and future bills, through cross-debt arrangements.

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