Reduction in circular debt of gas sector by 70pc: PM directs Petroleum, Finance Divisions to prepare master plan

ISLAMABAD: Prime Minister Shehbaz Sharif has directed Petroleum and Finance Divisions to prepare a master plan to reduce circular debt of the gas sector by 70 percent from existing Rs 1.6 trillion to Rs 500 billon by December 28, 2022, sources close to the finance minister told Business Recorder.

The decision was taken at a meeting on gas sector circular debt presided over by the prime minister on December 19, 2022.

The meeting was attended by the Minister for Finance, Senator Ishaq Dar, Minister for Economic Affairs Division (EDA) Sardar Ayaz Sadiq, Minister for Power Khurram Dastgir Khan, Minister for Information Marriyum Aurangzeb, SAPM on Government Effectiveness, SAPM on Finance, SAPM on Petroleum, secretaries Finance, EAD, Petroleum, Power, Additional Secretary II&III PMO, and Director General Gas.

The prime minister stressed upon urgent completion of assigned tasks of the strategic roadmap.

After detailed discussion on gas sector circular debt, it was decided that the Petroleum Division, in collaboration with the Sui Southern Gas Company (SSGC) and the Sui Northern Gas Company Limited (SNGPL) to present a roadmap on reduction of inefficiencies and installation of Town Border Station (TBS) meters with 60 days.

Gas sector 10-member body formed on circular debt settlement

Petroleum Division, SSGC, and SNGPL have been given deadline of December 23, 2022 for completion of task. According to sources, the Petroleum Division and the Finance Division have been directed to prepare a master plan to reduce the stock of gas sector circular debt to Rs 500 billion from existing amount of Rs 1.6 trillion.

The master plan will include a strategy and a concrete (financial) proposal along with an implementation plan on the settlement of debt. The plan will also include the process and timelines for transfer of the controlling stakes of GEPCO and Nandipur to Pakistan State Oil. This task has to be completed by Petroleum and Finance Divisions by December 28, 2022.

The Petroleum Division has also been directed to work out the components of Unaccounted for Gas (UFG) separately i.e. losses from non-recovery of bill and losses from theft highlighting the contribution of each component to the gas sector circular debt along with proposals to reduce it and present to the prime minister by December 30, 2022.

The sources said the Petroleum Division will liaise with the Power Division to present a plan for allocation of domestic gas to the power sector circular debt along with proposals to reduce it and present to the prime minister by December 23, 2022 (today).

The Petroleum Division to present a complete action plan to enhance domestic production and availability of liquefied petroleum gas (LPG) by December 30, 2022.

The sources said the meeting also decided that the Petroleum Division will convene a meeting with key stakeholders to finalise a way forward on pricing mechanisms in the gas sector to reduce the flow of circular debt. Petroleum Division has been directed that efforts be made to protect the low-end users in the colder regions.

The Power Division has been directed to firm up the alternative proposals on the reduction of power sector circular debt and present it to the prime minister on Monday (December 26, 2022). The meeting has also directed the Finance Division to finalise the process of privatisation of two RLNG-based power plants to the potential buyers after completing requisite due diligence with transparency by December 28, 2022.

Copyright Business Recorder, 2022