08/07/2010 (The New Vision) - The Government is seeking Parliament approval of a $52m loan (about sh108b) from the International Fund for Agricultural Development to expand oil palm production in the country.
The total investment and recurrent costs for the project, including contingencies, are estimated at sh294b.

Oil Palm Uganda Limited (OPUL) will contribute sh140b, which is about 48% of the total project cost.

The oil seed development component will benefit 13,600 households, especially in the eastern and northern regions.

The project will involve commercialising oil seed production with emphasis on sunflower, soya beans, groundnuts and simsim.

The loan will also be used to identify new areas for palm oil development to fulfil the Government’s agreement with BIDCO to avail 40,000 hectares of land for palm cultivation. Only 10,000 hectares were availed by the Government in Kalangala district.

Agriculture state minister Aggrey Bagire yesterday said trials had started in Buvuma, Kibaale, Kabarole, Hoima, Masindi, Bundibugyo, Bugiri, Jinja, Iganga and Masaka, as possible areas where palm trees can grow.

He said palm oil development in these areas would replicate the Bugala Island nucleus estate-smallholder model of 1,000 hectares.

Under the model, 3,500 hectares are for smallholder farmers and 6,500 hectares are a nucleus estate.

The project will be a continuation of the Vegetable Oil Development Project, which was started in the 1990s.

Appearing before the parliamentary committee on national economy, Bagire explained that the Government would contribute $15m, which is about 9% of the total cost of the project.

The Government’s contribution will be utilised on land purchase in Buvuma Island to cost $8.3m. About $5m will meet the cost of ferry barges, taxes and NSSF contribution for people employed by the project.

State minister for micro-finance Ruth Nankabirwa said the loan, which will be payable in 490 years, had a grace period of 10 years, with an interest rate of 0.75% per annum on disbursed and outstanding amounts.

“I request you to support us to get this funding because the terms are considered highly consensual and fall within the Government’s debt strategy. The oil project has made a big impact on the welfare of farmers in the areas it is established.”

The ministers said the loan would consolidate the expansion of the palm oil project in Kalangala, on Bugala Island and on the outlying islands of Buyama, Bubembe, Funve and Bukasa.

The first domestically produced palm oil by BIDCO is expected this year.

Latiff Ssebbaggala (DP) supported the project, saying although the palm oil project received negative publicity in its infancy, it had benefited rural farmers.

“I cannot refuse to support a pro-people project.” Ssebaggala stated as other committee members applauded him.