Gas supply to PSM disconnected

The Sui Southern Gas Company (SSGC) has disconnected gas supply to the Pakistan Steel Mills (PSM). According to a statement issued by the SSGC, the PSM started partially defaulting on the SSGC’s monthly gas bills in November 2008 and completely stopped making any payment after March 2015.

Subsequently, the SSGC served various termination notices to the PSM in July and August 2015 due to continuous default from the latter’s part. In addition to this, the SSGC gradually reduced its gas supplies to the PSM from 21 MMCFD in fiscal year 2014-15 to 2 MMCFD in fiscal year 2015-16.

The SSGC also waived disconnection notices several times in order to keep the coke oven batteries of the PSM intact and also help achieve resumption of the steel mill operations if there was a revival plan in the future.

The gas utility said that since 2015-16, it had been continuing gas supply to the PSM at a quantum of 2 MMCFD with an average billing value of Rs100 million per month, but payments from the PSM remained erratic.

The statement reads that upon consistent follow-up from the SSGC, effective February 2020 onwards, the PSM started making monthly payments in view of budgetary allocations/bailout package from the federal government. Those funds were, however, being released after lapse of considerable time causing the SSGC to bear financial burden due to significant delays in payments.

The SSGC said the federal government, including the Privatisation Commission, Ministry of Industries and Production, and Ministry of Energy (Petroleum Division) had been working on revival plans for the PSM during various times and the SSGC always supported those efforts by continuing the gas supply. A recent such development was initiated in 2021, wherein a proposal regarding transferring of the PSM’s core assets and land to a new subsidiary company was floated.

The SSGC said it remained active while safeguarding its interest to facilitate the privatisation process of PSM but that process did not materialise.

Through a written communication from PSM, the SSGC was informed about a recent Economic Coordination Committee meeting “that no further payment against consumption of gas supply to PSM will be made beyond June 30, 2024 so that no further liability of Federal Government against SSGC could accrue”. In view of the same, the SSGC sought clarification from the PSM and served a disconnection notice. However, the PSM did not respond to the notice and consequently after expiry of the deadline, disconnected gas supply to the PSM while keeping in loop all the relevant ministries, the statement read.

The gas utility said it provided the PSM several opportunities to honour its commitments but the steel mill not only defaulted on payments of gas bills but also could not provide any palatable payment plan. Finally, the federal government also decided to discontinue its financial support to the PSM leaving the SSGC with no option but to discontinue gas supply to the PSML on July 4, 2024, later in the night. The statement reads that the total outstanding dues of the SSGC against the PSM as on June 30, 2024 amounted to Rs97.697 billion, which included late payment surcharge (LPS) amounting to Rs73.4 billion.