Government's decision to absorb 25 percent of the recent hikes in utility tariff might be good for organized labour. However, this action might come at a huge cost to the country and the power companies.

Government has to cough GHc400 million to take care of this 25 percent reduction in utility tariff.

This is coming at a time government is financially constrained, with barely enough to cater for its operations.

The move means government might be taking funds meant for a road project elsewhere to cushion consumers from these hikes for the next three months.

Another challenge is that of payment. For most of these companies, they are often not too excited anytime government decides to absorb utility tariffs, because of the time it takes to settle these debts. 

They are already worried that this move would take them back to the era, where these debts are not settled on time. This consequently affects their operations.

Analysts say any delay in settling these debts would not only affect the operations of Electricity Company of Ghana, but also, the Volta River Authority and GRIDco.

Meanwhile, the Africa Centre for Energy Policy has warned government’s decision to absorb a fraction of the electricity tariff would only lead to a gradual collapse of utility companies.

Director of Energy and Policy of ACEP, John Peter Amewu tells JOY BUSINESS the situation could further discourage investors going into independent power production.

But the Association of Ghana Industries (AGI) has welcomed government’s subsidy.

While appreciating the need for the payment of realistic tariffs to enable utility companies provide the best of services, Executive Secretary of AGI, Seth Twum-Akwaboah maintained some compromise had to be reached to relieve industries of the negative effects of high tariffs on their businesses.