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Karuma, Isimba to cost extra Shs 1.8 trillion

Karuma, Isimba to cost extra Shs 1.8 trillion: An investigation by The Independent reveals how if Energy Ministry officials and those at Uganda Electricity Generation Company Ltd were properly supervising dam construction instead of bickering over control, they could have saved the country enough money to build another hydropower dam.

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Powerful Chinese lobby leaves Museveni helpless

If Energy Ministry officials and those at Uganda Electricity Generation Company Ltd were properly supervising dam construction instead of bickering over control, they could have saved the country enough money to build another hydropower dam. That is the conclusion of an investigation done by The Independent.

The two government departments are supposed to play different but complementary roles on the on-going construction of 600MW Karuma and the smaller 183MW Isimba hydropower dams. However, officials from the two departments are busy fighting a turf as the Chinese and Indian constructors get away with alleged shoddy works and costs spiral out of control. The latest information indicates that the two dams are set to cost government an extra Shs 1.8 trillion on top of the initially stated Shs. 7.2 trillion. The emerging extra Shs1.8 trillion is enough to build another dam of the Isimba size.

Some of the extra costs are directly resulting from the officials turf fight and could have easily been avoided. However, other costs cropping up appear not to have been planned for, according to a high level independent audit of the two power infrastructural projects. The other view emerging that the constructors, with connivance of some government official deliberately offered a low bid price with a promise that they could put in fresh claims during implementation of the project.

Auditors of the two projects; led by Dr Kamal Gautam of ILF Consulting Engineers, raise the issue of emerging and not-provided for costs in a June 12, 2015 report seen by The Independent. The auditors warn that the lapses “stand to impair the project if not avoided”. They also warn of the lack of transparency in some of the project transactions.

“The Employer (UEGCL, MEMD and MFPED) needs to review the project costs and available funds for Karuma and Isimba separately to eliminate funding gaps. If the missing funds are allocated to some other agencies outside of UEGCL or MEMD, it should be redirected to the Implementing Agency transparently,” the auditor warns.

When he received the audit on June 22, 2015, Keith Muhakanizi, the Secretary to the Treasury, was not very happy. Four days later, he wrote to Energy Ministry Permanent Secretary Kabagambe Kaliisa notifying him about concerns in the audit.

Construction work at Karuma
The Construction site

Muhakanizi noted that there is ineffective leadership in the implementing process of the projects, lack of competent and experienced personnel working with Energy Infratech and the fact that the contractor was working without approved drawings and work methodology.

He noted that the government had devoted a lot of resources in the projects and it was imperative that it got value for money.  Costs include loan management fees, interest during construction, price adjustment according to EPC contract, Resettlement Action Plan (RAP), CDAP, the owners’ engineer contract, overheads, project management, staffing, contingencies, claims, and variations, among others.

Muhakanizi asked Kaliisa to explain how was addressing the concerns and provide a revised implementation schedule and associated financing requirements. He also demanded detailed accountability for the already released money.

“This ministry (Finance) will not provide operational resources for the projects for the FY 2015/2016 unless the above issues have been addressed and detailed work plans for the projects have been submitted,” Muhakanizi warned.

The most controversial costs for now appear to be around supervising the dams. When Energy Ministry officials contracted Indian firm Energy Infratech, it was supposed to supervise the two dams as the Owners’ Engineer. Infratech’s contractual fee was supposed to be US$7.5 million and Shs. 3.8 billion or about Shs30 billion in all. To get the deal, Infratech threw around some highly qualified staff it would require for the job.

However, with the deal in pocket, Infratech appears to have gone shopping for the cheapest, least qualified staff it could find.  These accusations are backed by an audit of Infratech staff. The Audit shows that Infratech hired less manpower of various experts, hired some unqualified ones, and threw in several who worked on part-time basis. In fact, Infratech’s lead manager was based in India and not on site.  Following the audit, several Infratech staff members, including the Projector Director – Uganda Operations for Karuma and Isimba, Dr. Srinivasan Krishnamurthy and the Consultant S.K. Saxena, were fired.

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