BROKE GOVERNMENT TO DITCH POWER SUBSIDIES?
As the much awaited Bujagali hydro electric power plant is due to go into production later this month with an initial output of 50 MW, gradually rising to a full 250 MW at peak demand periods by April next year, have news emerged that government is considering to expire subsidies to the sector.
Already in serious default over payment of contractually agreed subsidies to the independent power producers using thermal plants, propelled by diesel or heavy fuel oil, the empty coffers and inflationary pressures have created this doomsday scenario, following relatively uncontrolled spending by government in the past.
Estimates were published that from a present cost to the domestic end consumer of 385.60 Uganda Shillings per kilowatt hour this could rise to more than 800 Uganda Shillings, making it not only the most expensive electricity bills in the region but fueling inflation even more than is presently the case.
While government seems to think that shifting these resources to promote power generation, mainly financing and fast tracking the proposed Karuma Falls hydro electric project, Ugandans may have different views when increased electricity bills start hitting them, also having implications for the political situation in the country, where tempers are already flying high and hot.
Hoteliers polled on the subject were up in arms over the prospects of seeing their already significant electricity cost doubled, with some of them saying it would immediately result in higher tariffs for hotel accommodation as no amount of trying to save somewhere else can absorb such an increase. This would seriously impact also on the cost of safaris across the Ugandan national parks, a dampener on the hopes for a great 2012 after Uganda was declared as the most desirable tourism destination last week according to a global survey. And with oil production remaining a distant hope, after government and in particular
Tullow Oil being remain bogged down over contractual and policy issues, there is no telling when this situation will improve or when cheaper, locally pumped crude will find its way into the Ugandan supply chain and bring prices down. Watch this space.