ISLAMABAD - The two state-owned natural gas companies SNGPL and SSGC Monday said that they are losing money due to huge difference in the gas purchase and sale prices which is increasing the circular debt, demanding the government to increase the gas prices to resolve the issue.
Sui Northern Gas Pipeline Limited (SNGPL) is purchasing natural gas from gas producers at an average rate of Rs 629 per million British Thermal Unit (MMBTU) and selling at Rs399 per unit, with a net loss of about Rs230 per unit which is making business operations difficult and weakening company’s financial health, said Managing Director SNGPL Amjad Latif while briefing the Senate Special Committee on Circular Debt here.
The Senate Special Committee on Circular Debt, which met with Senator Shibli Faraz in the chair, asked both the public gas companies i.e. Sui Northern Gas Company Limited (SNGPL) and Sui Southern Gas Company (SSGC) to launch an awareness campaign among consumers for stopping wastage of natural gas and also encourage them to use efficient appliances. The gas utilities asked the government to pass on the impact of higher gas costs to consumers to dissolve the circular debt of around Rs123 billion that had caused a serious cash flow problem. The chief executives of both utilities sought help of the standing committee to increase consumer gas prices to overcome financial difficulties.
The committee was informed that the ever-increasing receivables of the gas companies and the rate difference between the purchase price and the sale price are the main reasons in increased circular debt in gas distribution companies i.e. SNGPL and SSGC. The committee was also informed that both the natural gas companies’ have hundreds of billions of rupees receivables on their balance sheets.
Managing Director SNGPL, while briefing the Committee, said that as of August 20, 2018, the company had total outstanding receivables of Rs165 billion against the payments of Rs171 billion. The major receivables included Rs21 billion from power companies, Rs20 billion from all other consumers and Rs123 billion from the government on account of price differential.
“We are buying costly gas while selling to consumers at cheap rates. For the last five years, gas prices have not been increased so the hardships for the company are increasing,” Amjad Latif said. SNGPL MD said that the arrears of the RLNG are being cleared fortnightly, while payments to other local gas are kept unpaid for years.
Sui Southern Gas Company Limited (SSGC) Managing Director Amin Rajpoot, while briefing the committee, said that the gas companies would not have faced problems if there were timely price increases. Under the head of tax refunds, the company has to receive Rs50 billion. MD SSGC said that the company has receivables of Rs55 billion against Pakistan Steel Mills and around Rs80 billion against K-Electric. Outstanding amount against the consumers stands at Rs28 billion.
Rajpoot said that because of the sovereign guarantees the gas companies were required to make timely payments to foreign gas producers but on the other hand was not able to recover prices from its consumers. However, he said the gas utilities were not able to clear dues to state owned gas producers like OGDCL and PPL.
Amjad Latif said that Ogra had forwarded its tariff determination with about 30 percent average increase to the federal government but this could not be notified due to change of the government. Under the Ogra rule, the regulator was required to notify the prices in case of failure of the federal government within 40 days to respond to its determination but the regulator did not do so, he said.
Member Finance of Oil and Gas Regulatory Authority (OGRA) said that governments take political decisions which create hardships for companies. OGRA can only give advice to the government and cannot take decisions. He said that OGRA had advised the caretaker government to increase gas prices, but this decision was left for the new government. Now, it is up to the PTI government to take this decision.
Shibli Faraz said that due inclusion of taxes in electricity and gas bills, the poor cannot pay the charges. From production to distribution, the poor are paying for the theft of others. The current high prices of gas and electricity are compelling the consumers on theft. The Committee noted that OGRA should share with the committee a concise solution to the matter of dealing with this accumulated payables and to get timely payments to the company as well. The Committee members observed that there has to be work on a long-term mechanism to deal with the problems in payables and receivables of the companies.
The meeting was attended by Senator Dr Sikandar Mandhro, Syed Muzaffar Hussain Shah, Bahramand Khan Tangi, Kauda Babar, Member Planning Commission, MD SNGPL, acting MD SSGP, representatives from Power division and OGRA.