Uganda has scrapped plans for a hydro power station near Murchison Falls, an official said Wednesday, a project tourism operators had warned would irreversibly scar one of East Africa's natural wonders.

Cabinet agreed the proposed 360-megawatt project on the Victoria Nile in Murchison Falls National Park would "affect the scenery, ecosystem and subsequently tourism", said Tourism Minister Ephraim Kamuntu.

More than 100,000 tourists visit the park in Uganda's northwest every year, the government says, to gape at mighty waterfalls that channel the force of the world's longest river through narrow points.

"Cabinet took a decision at its latest sitting that there will be no construction of the hydro power dam in Murchison Falls National Park," Kamuntu told AFP.

"Definitely we still need more electricity to power our expanding economy, but this project can go elsewhere, not in the park."

Earlier this year Uganda's Electricity Regulatory Authority announced that a South African firm, Bonang Power and Energy Pty (Ltd), had applied for a licence to construct a hydropower dam at Uhuru Falls, upriver from Murchison.

The proposal caused outcry and a spirited campaign by Uganda's hoteliers, environmentalists, researchers and tour operators under the "Save Murchison Falls" banner.

"This is the gift of a lifetime. I am very happy this has been rejected by the government," said Ambrose Olaa, an activist who campaigned against the hydropower project.

"It was going to destroy the tourism potential our region has. We demand the government stick by its position, and not turn back."

Uganda's economy is fast-growing at more than six percent annually, with similar expansion forecast for 2020 in the landlocked nation of 42 million, according to the World Bank.

More than three-quarters of its installed energy capacity comes from hydropower, the International Hydropower Association says, but less than 15 percent of its inhabitants have access to electricity.

Uhuru Falls, which means "freedom" in Swahili, was created in 1962 when powerful floods cut a second channel about 200 metres (yards) north of Murchison Falls, after which the fabled park is named.

At Murchison, the Nile is squeezed through a seven-metre gap in the rocks and tumbles 43 metres (141 feet) with tremendous force as it continues its journey toward Lake Albert.

The waterfall featured in the 1951 Hollywood adventure classic The African Queen starring Humphrey Bogart and Katharine Hepburn.

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