Government increases fuel tax by Shs50

Part of the Bujagali hydro power plant in Jinja District. At least Shs1.093 trillion has been allocated for the construction of the Karuma hydropower dam. PHOTO BY ABUBAKER LUBOWA

The energy sector budget has registered a Shs281b boost up from last year’s shs1.4 trillion.

But as the budget increases, Finance Minister Maria Kiwanuka, while presenting the 2013/14 budget, yesterday also announced a Shs50 tax increase on petrol and diesel, saying such increase will raise Shs72b in tax revenue for the government.

If her proposal is approved by Parliament, vehicle owners will have to pay Shs50 more per litre.

Ms Kiwanuka also defended the restoration of the Shs200 tax on paraffin saying “it will discourage the act where diesel fuel is adulterated by kerosene” by unscrupulous people.
The tax on paraffin is expected to raise Shs15b.

The energy sector estimates show that the biggest chunk of the Shs1.7 trillion budget will, however, go to preparations for construction of an oil refinery and the Karuma Hydro Power project.
Shs39b of the sector resource envelope will be spent on the refinery construction activities up from the Shs12b budgeted last year while the Karuma dam project has been allocated Shs1.093 trillion, Shs48m up from last year.

Anti-Corruption Coalition Uganda Executive Director Cissy Kagaba said although it is exciting to hear that the funding for the sector has been increased, Ugandans we should also try to understand that the objectives funded are far from reach.
She also expressed distrust on increase in funding saying although it is paramount for national development, it will always remain a folk story so long as there are no structures to fight corruption.
“The Shs39b for the refinery construction activities is too small because even the displaced/affected persons have not yet been compensated.

“The Karuma project, which was allocated the biggest chunk has been dogged by controversies.” she said.
But not all the money will go into infrastructural construction.
Twenty per cent–Shs218b–of the Karuma budget will go into the initial actual construction works and the rest of the funds are planned to, among others, facilitate five sensitisation workshops for people affected by the project, local community, compensate and resettle affected persons.

The oil refinery money is planned to facilitate the implementation and completion of logistics study, to undertake the transaction advisory services for refinery development, undertake aviation studies for aerodrome development and implement the crude oil pipeline to the refinery and storage facilities study recommendations.

Government has also given Shs3b to Nema to carry out Environment Impact Assessment (EIA) in the Albertine Graben.

This, Mr Tony Otoa, a political analyst, said will empower Nema to exercise its mandate of protecting the environment.

He added that “talking about fast tracking the Kenya-Uganda-Rwanda oil pipeline project is the only good thing I heard in the budget.”
The pipeline is aimed at simplifying the transportation of refined oil products from Mombasa through Uganda to Rwanda.

Mr Henry Bazira the director of Water Governance Institute, said the Shs3b to Nema might not accomplish a lot.

“EIAs require a lot of skilled manpower, capacity building and a series of activities, that I think won’t be met by this money,” he said.

Mr Bazira expressed pessimism on the Karuma dam project, saying it has raised more suspicions because of the back and forth bribery and corruption accusations.

Just like the oil refinery, the 600MW Karuma hydropower project will be constructed under the Public Private Partnership arrangement.

According to the new financial year budget estimates, government plans to start construction of the dam within the fourth quarter of this financial year.

Mineral Sector

• The mineral sector has had an allocation amounting to Shs8b, up from Shs2b last year, largely to commence ground geophysical mapping of Karamoja and procurement of equipment for geothermal exploration.
• The Ministry of Energy notes that the current land tenure system has hampered most of its projects, especially in the development of the mining industry.
It calls for amendment of land laws to create enabling environment for investors to access minerals.
• There is high turnover of staff in the sector. The ministry is calling for increased remuneration of its staff to ensure attraction of a strong pool of talented people. It also requests for priority financing of the infrastructure such as electricity, water and roads in mining areas.