SNGPL, SSGCL on verge of bankruptcy, say MDs

UFG losses have become unbearable; circular debt payment issues also discussed

ISLAMABAD:

Pakistan’s two gas utility companies are nearing bankruptcy as their annual losses due to unaccounted for gas (UFG) have gone over Rs53 billion, according to their managing directors, but they have been allowed to pass on roughly Rs18 billion to the consumers, while the rest are deducted from their profits.

The managing directors of Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC) revealed the utilities’ fast deteriorating financial conditions during a meeting of the Public Accounts Committee held on Tuesday.



The PAC also took an update from Auditor General of Pakistan (AGP) Rana Assad Amin regarding the status of the audit report of Rs480 billion circular debt payments. It also showed concerns over the government’s move to charge sales tax on petroleum products by including other taxes in prices aimed at maximising revenues. The government calculates 47.5% GST on high speed diesel by including petroleum levy, which PAC Chairman Khursheed Shah said was unprecedented in the world.

Gas companies

The financial affairs of SSGC seem to be alarming than the SNGPL’s. As against the permissible limit of 4.5% UFG losses, the company’s losses were 15%, revealed SSGC MD Khalid Rehman. He said 1% losses were equivalent to Rs2 billion, bringing total losses to Rs30 billion. The 15% UFG losses are highest ever reported by any company.

Rehman admitted that two-thirds of the total UFG losses were due to theft while the remaining was because of obsolete gas pipelines. He said in Balochistan UFG losses were 51%.



“4.5% UFG losses target is unachievable,” said Rehman while requesting Oil and Gas Regulatory Authority (Ogra) to relax the ceiling - a demand that was opposed by PAC members. “Relaxing the UFG ceiling would mean sanctioning the theft, which the OGRA cannot do”, said Pakistan Tehreek-e-Insaf’s (PTI) Arif Alvi.

SNGPL Managing Director Uzma Adil said her company’s UFG losses were 11.5% that amounts to roughly Rs23 billion. She said that roughly 45% of the total losses were on account of theft.

Determination of UFG losses has become a political and judicial issue after the National Accountability Bureau filed a reference against the PPP ministers who manipulated the determination by getting the losses fixed at 7% in 2010-11 against the permissible limit of 5% of that time.



The PAC members, belonging to PPP, favoured a realistic UFG ceiling.

Ogra Chairman Saeed Ahmad informed the PAC that a benchmark study to determine a realistic UFG ceiling was under way and will be completed in next four months. He said until NAB announces the outcome of UFG case, the new benchmark cannot be fixed.

Due to dispute over the UFG, both gas companies have not finalised their financial audit reports of last two fiscal years, violating the requirements of Securities and Exchange Commission of Pakistan.



Debt payments

The issue of Rs480 billion circular debt payments in June 2013 came back to haunt the ruling party after media reports that the office of Auditor General of Pakistan (AGP) was trying to push the report under the carpet.

Allegations of dropping the audit charges were levelled by former AGP Akhtar Buland Rana, who claimed that he was ousted after he ordered audit of Rs480 billion payments.

The incumbent AGP, Rana Assad Amin, came hard on his predecessor and rejected the allegations. “The former AGP was removed by the Supreme Judicial Council (SJC) after 20 charges of misconduct and irregularities were established against him,” said Amin.



“The statement of former AGP is breach of privilege of the PAC, the Parliament and SJC and these institutions should take notice of it,” said a visibly perturbed Rana Assad Amin.

In the October 7 meeting of Departmental Accounts Committee (DAC), only two audit objections involving Rs11 million have been recommended to drop, said the AGP. The AGP said the audit report of Rs480 billion circular debt payments was in process of finalisation and his department requires two more weeks to complete the work.

Amin said it was a rubbish allegation that his department has settled all the audit objections and no one should expect that he would compromise only because he has served in the Ministry of Finance.

Amin said that the delay was on part of the Ministry of Water and Power that has sought another meeting of DAC to show more record related to the payments. Amin also maintained that while serving in the Ministry of Finance he was not involved in making these payments as they were cleared by Secretary Finance Dr Waqar Masood. 

Published in The Express Tribune, November 4^th, 2015.

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