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October 10, 2019

To avoid gas loadshedding: Rs54.4 bn RLNG to be supplied to domestic sector in winter


October 10, 2019

ISLAMABAD: The circular debt on account of just RLNG is also set to soar by up to Rs177 billion as the government has decided to inject costly RLNG of 1.362 billion cubic feet to domestic and commercial sectors amounting of Rs54.5 billion in winter season starting from November 2019 to March 2020.

The government is going to take this step as it has failed to recover Rs18 billion against supply of RLNG amounting to Rs29 billion it injected to domestic sector, unfolds the official document available with The News.

“Yes, the raise in circular debt will have adverse effect on the financial health of Sui Northern, Pakistan LNG Limited (PLL) and PSO, as PLL and PSO will have liquidity problems in timely opening letter of credit for LNG imports,” one of the top relevant officials at Petroleum Division confirmed saying to avoid gas loadshedding in winter season, the government wants to provide RLNG to domestic sector. He, in the same breath, said if the subsidy is not given against the RLNG injected in last winter and being injected in the coming winter, the economic woes of Sui Northern will multiply manifold.

It is pertinent to mention that the government has given the undertaking to donor agencies (IMF and World Bank) that RLNG price will remain ring fenced and cannot be diverted to domestic sector, as the full price of RLNG cannot be recovered from residential consumers.

Out of Rs29 billion, the amount of Rs11 billion alone has so far been recovered through gas swap mechanism, but the remaining amount of Rs18 billion is yet to be recovered and the Petroleum Division has prepared a summary to ECC seeking either the subsidy of Rs18 billion or permission to pass the brunt of Rs18 billion on to LNG consumers such as CNG sector and power sector consumers.

However, under the new scenario, the official said that the gas swap mechanism is no more doable as the local gas availability to Sui Northern even in summer season has plummeted to 925 mmcfd from 1500 mmcd.

Mentioning the forthcoming winter season, Petroleum Division has also made its mind to seek the permission from ECC to again inject the Rs54.5 billion RLNG in the domestic and commercial sectors apparently to avoid any gas loadshedding but at the cost of financial health of Su Northern, which is already facing over Rs102 billion circular debt.

According to the pay and receivable position of PSO dated October 8, 2019, the Sui Northern is yet to pay over Rs70.9 billion to Pakistan State Oil and other official document says it owes Rs33 billion to PLL (Pakistan LNG Limited). However, another document says that Sui Northern needs to pay Rs56 billion to PSO not Rs70.9 billion.

The official said incase the government shows inability to give the subsidy, the burden of Rs18 billion and Rs54.5 billion will be passed on to CNG and power sector consumers resultantly the CNG and electricity tariff will increase. And if any decision is not made, the circular debt will soar to Rs176.7 billion, which will further deteriorate the financial heath of Sui Northern.

The top official while quoting the document said that the expected injection of RLNG of Rs1.362 billion cubic feet will be made during five months of coming winter season. He explained that the expected injection of RLNG in domestic sector in November 2019 will be at 138 mmcfd, in December 266 mmcfd, in January 474 mmcfd, in February 386 mmcfd and in March 130 mmcfd.

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