{"id":34122,"date":"2022-07-16T19:30:12","date_gmt":"2022-07-16T19:30:12","guid":{"rendered":"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda"},"modified":"2022-07-16T19:43:02","modified_gmt":"2022-07-16T19:43:02","slug":"looming-diesel-crisis-fuels-fears-in-uganda","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda","title":{"rendered":"Looming diesel crisis fuels fears in Uganda"},"content":{"rendered":"

Africa-Press – Uganda. <\/strong><\/span>Five months ago, there was cause for optimism when the Tororo Persons Living with Disabilities Cooperative received a tractor from the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF).<\/p>\n

But instead of thriving in an oasis of hope, the cooperative has found itself grappling with a perfect storm.<\/p>\n

Mr Osinde Aluka, one of the cooperative\u2019s leaders, told Saturday Monitor that the tractor was originally grounded \u201cbecause it lacked some equipment when we got it.\u201d When the cooperative got a breakthrough as regards to equipment, it immediately faced another setback\u2014the retail price for a litre of diesel had soared from Shs4,000, when the tractor was received, to Shs6,000.<\/p>\n

READ:<\/b><\/p>\n

Why Ugandans have to brace for tougher times<\/p>\n

Wheat substitutes: Uganda can replace $120 m imports<\/p>\n

Schools struggle to feed learners as food prices continue to soar<\/p>\n

\u201cAt the current prices of diesel, you need seven litres to till an acre of land,\u201d Mr Aluka says, adding, \u201cThat means going back to our oxen ploughing, which is cheaper,\u201d he said.<\/p>\n

The steep increase in pump prices has also grounded another tractor the MAAIF gave to the Nsituriraku Cooperative Union in the eastern district of Buyende.<\/p>\n

\u201cWe shall have to charge our members more money because of the prices of diesel,\u201d Mr Eriya Erimirwa, the head of the cooperative, told Saturday Monitor, adding, \u201cThis means few members will be able to use this tractor.\u201d<\/p>\n

Mr Boniface Okanya, the commissioner of engineering and mechanisation at MAAIF, said the tractors were meant \u201cto increase\u2026productivity\u201d but fuel inflation had other ideas.<\/p>\n

He added that since it is apparent now that \u201cfarmers won\u2019t be able to use these tractors\u201d, government interventions in the form of subsidies for \u201cdiesel used for agricultural purposes\u201d will be a step in the right direction.<\/p>\n

Chain reaction<\/p>\n

Diesel is indispensable to Uganda\u2019s economy not least because it powers generators that provide critical electrical power, farm tractors that increase agricultural productivity, construction machines and equipment that build and maintain the crucial transportation and utility infrastructure, as well as trucks that transport food from the countryside to the market.<\/p>\n

Warnings of a looming global diesel shortage have become increasingly strident in recent weeks.<\/p>\n

With refiners struggling to keep pace with rapid post-pandemic demand recovery, an acute global energy shortage\u2014which has already sent the prices of gas, coal and crude oil soaring\u2014has worsened. It is feared that diesel shortages will push up fuel and transportation costs (most public service vehicles or PSVs run on diesel), further tanking the Ugandan economy.<\/p>\n

\u201cIt goes without saying that if the diesel shortage is long-termed, then some factories will have to close,\u201d Mr Corti Paul Lakuma, a research fellow at the Economic Policy Research Centre (EPRC), grimly acknowledges.<\/p>\n

\u201cIt\u2019s not easy to adjust from one fuel to another. And of course, prices of goods will go up to cover up the expenses that are being encountered,\u201d he said.<\/p>\n

READ:<\/b><\/p>\n

When living within your means no longer makes sense<\/p>\n

Speculators are partly to blame for high fuel prices<\/p>\n

Mr Lakuma forecasts that any switch to, say, bio-fuels will be met with \u201csevere consequences.\u201d<\/p>\n

He adds: \u201cFactories can turn food such as corn or sugarcane into fuel, but that would mean people might lack what to eat as they would be competing with factories. So still food prices will go up further.\u201d<\/p>\n

Besides being a majorly agrarian economy, most of Uganda\u2019s population resides in rural areas.<\/p>\n

Mr Richard Ssempala, an economist, says these two factors hold out frightening prospects in the event that there\u2019s an undersupply of diesel.<\/p>\n

\u201cFor instance\u2026matooke, one of the staple foods in Uganda, is grown in the central, western and southwestern parts of the country. Transportation of the [matooke] from farms to urban centres requires diesel fuel. An increase in the price of fuel has an impact on the cost of the final price of the products,\u201d<\/p>\n

Mr Ssempala, who is the coordinator of finance and development at Oxfam Uganda, says, adding, \u201cIt should be noted that most Ugandan factories use a significant amount of imported raw materials. This is supplemented with the costs incurred to transport the finished commodities to the market.\u201d<\/p>\n

Rising food prices force increase in inflation<\/p>\n

Food shortage hits Teso<\/p>\n

Mr Ssempala further noted that since \u201call profit maximising firms aim to minimise production costs, including transport\u201d, they will need little invitation to incorporate any additional costs of production \u201cinto the prices of the commodities.\u201d<\/p>\n

Following the near-collapse of what many observers called a promising industrial sector in the 1970s and early 1980s, Uganda embarked on a broad range of policy and institutional reforms.<\/p>\n

The pro-markets policies and macroeconomic industrialisation has, however, had limited successes.<\/p>\n

\u201cMost of the factories we have are small and they need diesel. Actually, Uganda needs more diesel than we are importing at the moment if it\u2019s to fully industrialise,\u201d Mr Lakuma says. \u201cIf we get a diesel shortage now when the prices are already high, the economy will contract further, leading to loss of jobs,\u201d he adds.<\/p>\n

Genesis of the problem<\/p>\n

In January, Uganda was hit by a fuel supply shock after Covid-19 pandemic curbs triggered a logjam of fuel tankers at the Malaba border snaking nearly 130km. In the aftermath of the shock, Ms Ruth Nankabirwa, the Energy minister, described the spike in pump prices from Shs4,000 to Shs12,000 as \u201ccheating.\u201d<\/p>\n

She also warned that the culprits \u201cwould be arrested and prosecuted.\u201d With no arrests in sight, and fuel prices still soaring, Prime Minister Robinah Nabbanja tried to allay fears by setting a price ceiling of Shs5,000.<\/p>\n

Pump prices normalised at that price ceiling and soon started shooting up when the impact of the Russia-Ukraine war started to become pronounced.<\/p>\n

In May, President Museveni was forced to address himself to the soaring fuel and commodity prices.<\/p>\n

He ruled out any fuel subsidies.<\/p>\n

\u201cIf we subsidise or even just remove the taxes on imported commodities, the level of consumption will either remain the same, but this time each litre takes more dollars\u2026 The dollar drain will now increase per litre and also, worse, people may buy more of this expensive commodity,\u201d the President said in a national address, adding, \u201cIn the Great Lakes area, there is another problem \u2013 smuggling. When an item is cheaper in one country\u2026there is a powerful incentive for smugglers to buy cheap in Uganda and sell expensively in the neighbouring country. Therefore, cheaper petrol in Uganda, would be cheaper for the region.\u201d<\/p>\n

Mr Museveni also warned that any state interventions would \u201cseriously encroach on our reserves.\u201d<\/p>\n

He further revealed that any removal of taxes on diesel would cost the treasury Shs1.15 trillion.<\/p>\n

He said since this\u2014and other proposed interventions\u2014would impact negatively on funding the Budget, \u201cremoving taxes or subsidising many of the imports is suicidal and a blunder.\u201d<\/p>\n

This was in tandem with what Mr Ramathan Ggoobi, the Secretary to the Treasury, proffered when he said \u201ctax cuts to address exogenous shocks\u201d is \u201ceconomics that doesn\u2019t work.\u201d<\/p>\n

If there\u2019s a prolonged scarcity of diesel, analysts believe the government\u2019s resolve not to intervene will be tested.<\/p>\n

\u201cWe will most likely see a government policy shift from non-intervention to direct intervention, especially for diesel prices that are major cost drivers for domestic industry and manufacturing,\u201d Mr Silver Kayondo, a lawyer who specialises in oil and taxation issues, says, adding, \u201cGains made in local dairy, sugar, tiles, paints and coatings, etc., face the risk of reversal.\u201d<\/p>\n

For More News And Analysis About Uganda<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Uganda. Five months ago, there was cause for optimism when the Tororo Persons Living with Disabilities Cooperative received a tractor from the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF). But instead of thriving in an oasis of hope, the cooperative has found itself grappling with a perfect storm. Mr Osinde Aluka, one […]<\/p>\n","protected":false},"author":84,"featured_media":34121,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8],"tags":[233,240,234],"class_list":["post-34122","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","tag-africa-press","tag-africa-press-uganda","tag-uganda"],"yoast_head":"\nLooming diesel crisis fuels fears in Uganda - Uganda<\/title>\n<meta name=\"description\" content=\"Five months ago, there was cause for optimism when the Tororo Persons Living with Disabilities Cooperative received a tr ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Looming diesel crisis fuels fears in Uganda\" \/>\n<meta property=\"og:description\" content=\"Five months ago, there was cause for optimism when the Tororo Persons Living with Disabilities Cooperative received a tr ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda\" \/>\n<meta property=\"og:site_name\" content=\"Uganda\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2022-07-16T19:30:12+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-07-16T19:43:02+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/uganda\/sites\/34\/2022\/07\/postQueueImg_8-62d314a9c96f4.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1620\" \/>\n\t<meta property=\"og:image:height\" content=\"1080\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/uganda\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Looming diesel crisis fuels fears in Uganda\",\"datePublished\":\"2022-07-16T19:30:12+00:00\",\"dateModified\":\"2022-07-16T19:43:02+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda\"},\"wordCount\":1265,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/uganda\/sites\/34\/2022\/07\/postQueueImg_8-62d314a9c96f4.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Uganda\",\"uganda\"],\"articleSection\":[\"all news\",\"economy\",\"homepage-english\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda\",\"url\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/looming-diesel-crisis-fuels-fears-in-uganda\",\"name\":\"Looming diesel crisis fuels fears in Uganda - 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