There are over 2,000 unlicensed fuel stations operating in the country, an investigation of the downstream petroleum operations by Auditor General John Muwanga has revealed.
The investigations revealed that whereas the fuel marking and quality monitoring reports indicated that there were 2,990 fuel stations operating in the country as of June 2019, the energy ministry database reported only 984 as of September 2019. This, Muwanga said, indicates that there are so many fuel stations operating illegally.
"The ministry did not undertake licensing of all fuel operators and facilities in accordance with the law, which indicates that there are many fuel stations that are operating in the country without licenses. This could have a diverse effect on the legal operations of the fuel stations and government revenues," Muwanga said in a value for money audit report.
The auditors further established that out of the 984 petrol stations reported as licensed in the energy ministry database, a total of 363 fuel stations were issued licences without meeting the minimum standards.
For example, it was discovered that 363 fuel stations did not possess the environmental impact assessment reports, 205 fuel stations did not have construction permits, while 698 fuel stations did not have construction completion certificates.
The auditors also noted that many fuel stations were operating without the required health safety and environmental standards.
"There have also been reports of an increase in the number of fuel stations supplying adulterated fuel to the unsuspecting public as indicated in the media," the report states.
Section 17 (2) of the Petroleum Supply Act 2003 stipulates that no person shall perform petroleum supply operations without a petroleum operating licence.
The application for a licence shall be accompanied by an approved environment impact assessment certificate issued by the National Environmental Management Authority (NEMA), approved construction plans from the district local governments, a construction permit, and a construction completion certificate issued by the energy ministry.
According to the report, an onsite inspection of 72 fuel stations by the audit teams, only 17 had valid licences of which only two had the entire prerequisite for licensing.
The energy ministry management, however, explained to the auditors that 2,990 fuel stations indicated in the fuel marking and quality monitoring programme included the illegal outlets, which once found, are closed through enforcement.
"However, as of this month, the ministry recognises the 984 outlets that are dully licensed. Otherwise evidence of NEMA, Uganda Revenue Authority and the Uganda Investment Authority certificate has been provided for the mentioned 489 fuel stations," the ministry stated in their response to the queries.
In terms of inspections, the ministry's data indicates that 1,695 inspection visits were made between 2017/18 and 2018/19 financial years although the ministry's work plan does not indicate the number of visits and fuel stations to be visited in a year.
During the inspections, the auditors discovered that some fuel stations were constructed on small plots, less than the required size of 1,200-meter square, some fuel stations were located near schools and in homesteads, other stations had oil spilling into water sources and others had no canopy, contrary to the law.
The Auditor-General, John Muwanga, blamed the gaps in the operations of petroleum in the country to increased the volume of petroleum trade in the country.
Petroleum fuels and other petroleum products have taken a significant proportion of the import bill in the country.
According to data available, import expenditure on petroleum products rose from sh2.8 trillion in 2016 to sh3.8 trillion in 2019, constituting 18.2% of the total imports in the country in 2017.