Gas circular debt surges to Rs350 billion

ISLAMABAD: The monster of circular debt into the gas sector has escalated to a staggering Rs350 billion because of different inefficiencies and policy inactions.

The gas prices were not passed on by increasing tariff from some time and the circular debt also piled up on account of RLNG. Thirdly, the Unaccounted for Gas (UFG) is also causing the hike. “At this moment, the circular debt build up into gas sector has touched around Rs350 billion,” former Economic Adviser Dr Khaqan Najeeb told The News on Wednesday. Earlier, it was assumed that the circular debt was only haunting the cash bleeding power sector where it was accumulating at supersonic speed and crossed Rs 2,253 billion mark but now the circular debt in gas sector has also surfaced.

Unaccounted for gas (UFG) is causing huge losses and its control is becoming increasingly difficult under the existing large unbundled system. There is a need to create separate cost centers in the form of separate legal entities so that accounting and operational performance can be measured with great authenticity and reliability. The existing consumers are accustomed to lower domestic gas prices and are not willing to pay the delivered cost of LNG. Thus a significant mismatch is created for the utility companies. The power sector has not yet taken the expected volumes of LNG and zero rated industry is not paying the full cost of LNG. In addition to this, LNG is being diverted to domestic users paying lower tariffs. Thus cost revenue mismatch for the utility companies is growing wider. Keeping in view the piled up difficulties, the government is devising much ambitious gas sector reform plan whereby the un-bundling of two giants into different distribution companies is on the cards.