Umeme is lobbying government to scrap taxes on imported transformers, which were imposed to boost demand for locally manufactured ones.
Government imposed a 25 per cent import duty to reduce importation of transformers. However, Umeme says there is not enough local capacity to satisfy demand.
Speaking during an excursion in western Uganda, Mr Selestino Babungi, the Umeme managing director, said whereas the goal of upholding the Buy Uganda Build Uganda policy is commendable, some of the transformers the company needs cannot be adequately produced locally.
“What we are finding costly now is when you bring in a power transformer that is big, the costs are increased by 25 per cent and we see these transformers as inputs into the whole production process, it is a deterrent cost,” he said, noting they had already written to Electricity Regulatory Authority (ERA) to ask government to reconsider the tax until such a time when the country has enough capacity.
“We will support local transformer manufacturing but for those that cannot be manufactured locally, that tax should be waived,” Babungi said.
The Ministry of Finance at the beginning of the 2020/21 financial year introduced a 25 per cent import duty on transformers with the goal of driving demand for those that are locally manufactured.
The energy, especially power subsector is one of those criticised for over reliance on imported goods.
Over reliance on imported products crippled the sector, especially during the Covid-19 induced global lockdowns which disrupted global supply chains.
The regulator, ERA, in May revealed that the power subsector had been forced to amend licences of more than 60 developers because of inability to import raw materials and technical experts needed during construction.
Mr Tarun Jain, Nile Transformers managing director, confirmed that while they have the capacity to locally manufacture some transformers in Uganda, the need to import raw materials from overseas affects their operations as witnessed during lockdown.
However, industrialists said there are plans to manufacture all materials across the entire supply chain to mitigate importation of raw materials.
The conversation around importation of energy products, especially transformers, is highly contentious after Ministry of Energy in June received a petition from manufacturers saying power players prefer imported transformers.
Local manufacturers claimed to have invested $28m into the subsector, with expectations of earning about $52m (shs195b) but were inhibited by power sector players’ adamancy to use imported transformers.
Ms Mary Goretti Kitutu, the Energy minister, said then that while she had written to power sector players to support local manufacturers, she was informed that since most projects are donor funded, they (donors) are given an upper hand by public procurement and public disposal authority.
However, she noted, there was need for legal reform to address the challenge and support local manufacturers.