Oil companies withhold Rs40b of gas surcharge

Call for resolving debt issue first, PAC summons federal secretaries.

ISLAMABAD: As petroleum companies refuse to pay Rs40 billion in state revenues while first seeking a solution to the circular debt problem, an irked Public Accounts Committee (PAC) on Tuesday summoned the three most powerful federal secretaries for their inability to restrict the debt pile-up.

The decision to call the federal secretaries for finance, water and power and petroleum was taken after auditors disclosed that the oil and gas exploration companies were refusing to pay gas development surcharge to the government. The PAC meeting, chaired by Nadeem Afzal Chan, had been called to discuss irregularities and embezzlement of funds in the Ministry of Petroleum and Natural Resources.

The Director General Audit Customs and Petroleum said the companies were reluctant to pay the surcharge and some of them were seeking adjustments on account of inter-corporate debt. According to the audit’s calculations, he added, the outstanding GDS has soared to roughly Rs40 billion.

In February last year, the auditors had recovered Rs33 billion from the oil and gas exploration companies that the petroleum ministry had forgone.

Despite a barrage of questions about the exact amount of state revenues being withheld by these companies, Secretary Petroleum Dr Waqar Masood could not give proper replies, inviting criticism from the PAC members.

Either the petroleum secretary was not prepared for the meeting or hiding certain facts as how could he be ignorant about the receivables, remarked Yasmeen Rehman of the PPP.

The PAC chairman observed that the federal secretaries complain that they are being humiliated in the PAC meetings but after today’s meeting it seems that the country’s affairs can now only be run by insulting senior bureaucrats in an effort to extract information from them.

The secretary petroleum, however, disclosed that the circular debt had once again increased to Rs370 billion by August 24. The disclosure confirms the views held by experts that the government has been making half-hearted attempts and is not serious about resolving the issue once and for all.

The finance ministry has made two unsuccessful attempts to clear the arrears, but ended up paying over Rs550 billion on account of circular debt in the last two years.

The Rs370 billion outstanding debt shows that the government may have to take another hit in a bid to absorb the debt, as the status quo will strangle the entire power sector that the government may not afford ahead of general elections.

The experts say the government is taking refuge behind subsidies that it pays to pick up the difference between cost of electricity generation and end-consumer price. They add it is not addressing other causes like line losses, theft and failure to recover bills due to corruption in different tiers of the state.

The secretary petroleum could not give a satisfactory response to the questions asked about the administrative actions taken to improve governance, the biggest cause of soaring circular debt after the financial aspect.

Endorsing the petroleum companies’ stance, Masood said without cleaning the circular debt the companies would not be able to pay state revenues. “If the companies were forced to pay due taxes, they may get bankrupt,” he said.

However, the auditors differed with the secretary petroleum, saying most of the companies, which were not paying the GDS, were not at all affected by the circular debt.

Published in The Express Tribune, August 29^th, 2012.