SSGC troubles cost national kitty Rs35b

Absence of permanent MD, high UFG losses, nepotism mar company’s performance

ISLAMABAD:

The Sui Southern Gas Company Limited (SSGC), an organisation of national and international repute, is becoming a sick unit since 2015 and may eventually become a burden akin to organisations like the Pakistan International Airlines (PIA) and the Pakistan Steel Mill (PSM) as nepotism mars the organisation.

Appointments on key posts on the basis of political affiliations and favouristism have largely contributed to the decline in the company’s performance.

Ad hocism has marred the performance of SSGC, which is causing an annual loss of Rs35 billion to the national exchequer due to its failure to control gas theft and losses.

Sources told The Express Tribune that the company is not only adding to the losses worth billions of rupees but it is also causing prolonged gas outages in Sindh as the management is pushing the country towards expensive LNG. Adding to that, it is recovering multi-billion rupees from the honest consumers who pay regular bills.

At present, SSGCL has 1,200 mmcfd of gas supply on its system and 200 mmcfd of gas is disappearing from the system due to gas theft and high losses at 17.5%.

“A loss of 1% means revenue loss of Rs2 billion and the company has caused a Rs35-billion hit to the national exchequer in fiscal year 2019-20,” an industry official said, adding that out of total 17.5% loss, the Oil and Gas Regulatory Authority (Ogra) had put Rs6.3 billion hit on the honest gas consumers who had to pay the cost of gas theft and leakages by SSGC management.

Officials said that loss in developed countries range between 1-2% but in countries like Pakistan, it should not be more than 6%.

In fiscal year 2020-21, SSGCL has underestimated volume of UFG at 11.15% to take some benefits on account of passing burden on to the consumers. However, Ogra projected losses at 15.85%. The country would lose precious resource of 67,476 mmcfd on account of gas theft and leakages in in FY2020-21. Commenting on the situation, CNG Association Chairman Ghiyas Paracha said that the UFG benchmark of SSGC was increased from 4.5% to 6.3% but it was linked with some targets. However, SSGCL had failed to meet these targets.

He said that Ogra had questioned the first time as to why the SSGC management was getting higher salaries when they had failed to control UFG losses. Secondly, he said that the acting managing director changes every year and there was no expert on the board of directors. He said that Balochistan’s was not more than 6% out of the total gas supply but SSGC was creating a misunderstanding that all losses were occurring in Balochistan.

Prime Minister Imran Khan had given a three-month deadline to appoint head of the company but no managing director has been appointed so far.

Since 2016 the company is being run on an ad hoc arrangement, as absence of a permanent managing director has made the post a game of musical chairs between the three deputy managing directors (DMDs) including current acting managing director Amin Rajput.

Former planning commission energy member Shahid Sattar said that SSGC had no permanent MD so it has a management problem. He said that the company admitted that it had over 17% UFG issue, which was 24% in actual against international standard of 2%. He said that the consumer base was expanding while the gas supply was shrinking leading to shortage of gas and hike in prices.

He said that the government should form a policy to restrict indigenous gas supply to the domestic sector and divert its power plants and those sectors that were generating economic activity.

He further said that 70% population had no pipeline gas and relied on LPG and wood, which cost four times higher price. He said that government should subsidise LPG for domestic consumers.

Setting aside the austerity drive of the Pakistan Tehreek-e-Insaf (PTI) government, as the company teeters on the verge of a financial collapse, declaring a loss of Rs14 billion for FY2017-18, it is going to hire a fourth DMD from the private sector. It is also going to make several appointments on other key posts from the private sector setting aside the promotions of existing employees, which would not only lead to resistance in the internal employees but it would also increase the operating cost.

As a result the performance of company is going down and line losses have gone up, thus making the company insolvent where equity has wiped out.

In 2016, then managing director Khalid Rehman hired two deputy managing directors (DMDs) from outside of the company. Although none of the candidates, who had applied for the position, qualified or possessed the requisite set of skills, they were still hired under political influence. The board of directors of that time endorsed them as senior general managers (SGMs) instead of DMDs. However, with their political clout, they managed to get themselves promoted as DMDs within one year of service whereas the minimum tenure required to be eligible for promotion is three years.

Simultaneously, an SGM for the human resources department was also hired by Rehman and surprisingly he was not qualified academically as well as in terms of service.

His hiring was examined by the government auditor and his report recommended that not only his experience was fake, but also his degree was also not in human resources but in international marketing.

The auditor recommended that he should be terminated immediately and all salaries and benefits should be recovered from him.

The SSGC management conducted an internal inquiry but gave him a clean chit on the pressure from the chairperson as the board wanted to protect Rehman for the dubious hiring, who was the brother-in-law of the chairperson. Furthermore, a case is pending against him in the FIA and the report is still awaited.

Ever since the hiring of the above-mentioned persons, the performance of the company has deteriorated. The UFG level has reached an all-time high and it is currently over 18%, which will result in a loss of Rs25 billion per annum.

The company will become bankrupt. Furthermore, the accounts of the company for 2017-18 has been finalised after the passage of several years and the utility has declared a loss of over Rs14 billion.

Despite bad performance of the company, these officials, who were hired on political grounds, have been getting exceptional treatment.

Their salaries have been increased out of turn and now they are demanding medical coverage for them and their family after retirement despite not meeting the criterion of a minimum 10 years of service.

Another such dubious hiring was that of Saeed Rizvi who, despite not having any engineering degree and not recognised by the Pakistan Engineering Council, was made the head of engineering services.

Rizvi, in his application at the time of hiring, hid his Bachelor’s degree, which was in physics and only showed his Masters in Engineering Management.

According to a Supreme Court ruling announced in October 2018, a person who does not possess the Bachelor’s in Engineering cannot be registered with the Pakistan Engineering Council and cannot be appointed the head of an engineering department.

The ruling was conveyed to the SSGC managing director through the Ministry of Energy for strict compliance, however, it ignored the verdict.

The current board is exceeding its limits, set by the SECP rules, and it and the chairperson are dictating their decisions that are the prerogative of the management.

In order to hide its incompetence, the board under the garb of reforming the company has decided to hire on all senior positions from outside of the company including the technical position.

This is being done in order to discredit the existing employees as being useless and to show the new inductees will turn around the company.

SSGC is a monopoly and the gas distribution-related expertise is not available in the open market, therefore, in all probability the newly hired persons will lack the basic knowledge and prove detrimental to the company.

On the other hand, the in-house executives, who are eligible to take up these positions, will be dejected and it may lead to the company’s nosedive.

In order to establish the board’s authority over management, the chairperson has ordered that disciplinary inquiries should be initiated against all those who raise voice against any wrongdoings.

Published in The Express Tribune, July 21^st, 2020.

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