The Pakistan Steel Mills (PSM) has constantly been defaulting on its payments to the Sui Southern Gas Company (SSGC), said the SSGC in a press statement released on Saturday.
The spokesperson for SSGC commented that the Pakistan Steel Mills stood today at a staggering default of Rs 35 billion which had made it difficult for the gas utility to finance its programmes of strategic nature including pipeline augmentation projects across its franchise areas.
He elaborated that since the last four years, PSM’s outstanding receivables had continued to rise. “In July 2012, PSM’s overdue balance with SSGC stood at Rs 8.3 billion. By the same time period in 2013, the balance had shot up to Rs 15 billion. Since then, the receivables have continued to mount uncontrollably and by July 2014, the balance had risen to Rs 24 billion. Today, PSM’s arrears total an amount of Rs 35 billion,” said the SSGC spokesperson.
He expressed concern over the matter saying the escalating amount of receivables had made it increasingly difficult for the company to make payments to local and foreign companies for purchase of gas as well as to meet other commitments.
The spokesperson also revealed that the PSM had not paid any amount to the Sui Southern Gas Company since April 2015.
He added that since the last few years, SSGC had continuously reminded PSM of its mounting dues, both through verbal and written notices, but has always stopped short of suspending gas supply to it.
The SSGC has given PSM ample opportunity and time to settle its dues through a steady supply of gas but the latter has continued to show a total lack of seriousness in this regard. The PSM is not even offering a palatable payment plan for the settlement of large overdue balances in spite of providing them many opportunities for doing the same.
The spokesperson added that every time a notice was served to PSM, it made a commitment to settle its dues. However, PSM repeatedly faltered on its commitment.
While recovering dues from corporate customers, the gas company follows a policy of gentle persuasion and when it notices failure in compliance from the consumer’s end and debts keep piling up, the suspension of gas supply becomes inevitable.
According to the media release, the PSM has itself taken the SSGC to a point where it had no option but to cut gas supply to it.
The SSGC had reduced gas pressure to the PSM since June 10, which resulted in low production and adversely affected the smooth running of the plant.
In July 2015, the SSGC served a notice to the PSM asking it to submit an acceptable payment plan along with a down payment and a firm assurance that it would settle the remaining amount. However, the PSM remained unmoved.
Another notice was served to the PSM earlier in August with the same requisitions. It clearly stated that in the event of failure in making the requisite payment, the SSGC would be compelled to not only discontinue deliveries of gas to the plant but also terminate the Gas Sales Agreement (GSA) without any further notice at PSM’s sole risk.
Earlier in August, a PSM official said the SSGC bills of Rs 35 billion were exaggerated as actual dues stood at around Rs 17 billion and the rest were penalties which should have settled between the two government entities with the intervention of federal ministries.
The spokesperson of SSGC commenting on the behaviour of PSM management said that instead of making any firm commitment towards settling its dues, the PSM had unfairly blamed the ministry of petroleum and the SSGC’s chairman for cutting gas supplies, asserting that their action had hampered its ability to run its plants productively.
“The PSM may be drowning but why is it that it wants other organisations such as the SSGC to drown with it?”
Earlier in the month, the PSM had sought around Rs 5 billion from the federal government along with postponement of gas bills to avoid complete shutdown after being standstill on heat-mode for 56 days with zero production.
Sindh Chief Minister Qaim Ali Shah in July expressed deep concerns over the discontinuation of gas supply which was to be effective from July 28, and directed the managing director of the SSGC to ensure uninterrupted supply as well as maintain production levels.
He said he would take up the matter with the federal government and in case of a cold response it would take it up in the Council of Common Interests agenda.
“This argument seems illogical since the payment of salaries is being made through the government’s bail-out package.”
He further added that if the PSM continued to default on its payments, its action would have a major impact on the financial health of SSGC forcing derailment of its capital expenditure projects. The spokesperson urged the PSM to rethink its policy towards the SSGC regarding payment of its dues.