SSGC victim of Rs155 bn circular debt

ISLAMABAD: Sui Southern Gas Company (SSGC) --- the state owned utility has now emerged as the victim of inter-corporate circular debt which explains why it is facing the unprecedented liquidity crunch.

Pakistan State Oil (PSO), the state owned company, according to official data, is already badly damaged by inter-corporate circular debt of Rs253 billion mainly because of circular debt in power sector that hovers around Rs451 billion. Power sector continues not only to haunt economy but also adversely impact the financial health of oil marketing company---PSO. 

PSO is unable to pay refineries as its payment capacity has been eroded because of non-payment of receivables of Rs253 billion.  In addition PIA owes Rs15 billion to the state owned oil-marketing-companies (OMCs). Moreover, Sui Northern also failed to pay Rs11 billion to PSO against import of LNG which has resulted in increasing the financial problems of PSO.

In the latest scenario, inter-corporate debt has also exposed another state owned company --- the Sui Southern to the cash flow situation. This startling disclosure has been revealed in the letter written to Finance Division by AGM (Treasury) of Sui Southern, of which the copy is available with The News.

According to the letter, the receivables of the Sui Southern have surged up to Rs155.353 billion whereas its payables have swelled up to whopping Rs99.716 billion as of April 4, 2017. “Owing to this the inter-corporate circular debt has jacked up to over Rs155 billion resulting in worrisome cash flow situation.”

However, the top sources say that Sui Southern has borrowed over Rs200 billion for making new assets such as RLNG pipeline from Karachi to Nawabshah and up-gradation of gas pressure compressor station at Jamshoro. The gas company is also making plan to lay down another RLNG pipeline on the direction of the central government. “The equity of the Sui Southern in the loan stands at Rs18 billion. In addition, it has borrowed to continue its various operations.”

However, the letter of Sui Southern also unfolds that K Electric has emerged a chronic defaulter of the gas utility because K. Electric owes a mammoth amount of Rs69.062 billion. KE is now being sold to Shanghai, a Chinese company. 

Pakistan Steel Mills which is going in huge loss also needs to pay Rs47.597 billion to Sui Southern. In addition, Sui Northern also owes Rs20.8 billion to Sui Southern in the head of uniform price (Rs11.618 billion) and in the head of RLNG (Rs9.189 billion). The non-payments by Sui Northern have stepped up the financial woes of the Sui Southern.

More importantly, power sector also needs to pay Rs1.879 billion for the gas for power generation for the Sui Southern supplies to JPCL, Quetta. And if the sales tax of Rs16 billion is added, then the receivables of Sui Southern amounts to Rs155.353 billion.

Mentioning the payables of the Sui Southern that have risen to Rs99.716 billion, the official correspondence also reveals that the gas utility has defaulted to oil and gas company limited (OGDCL), Pakistan Petroleum Limited (PPL) and government holding company Government Holdings (Private) Limited (GHPL). The Sui Southern owes Rs64 billion to Oil and Gas Development Company Limited (OGDCL), Rs19.089 billion to Pakistan Petroleum Ltd (PPL) and Rs15.727 billion to GHPL. The top sources said that gas utility company is unable to pay dues of OGDCL, PPL and GHPL as it has miserably failed the collect its dues of over Rs155 billion from K Electric, Steel Mills, Sui Northern and power sector.