The deficit of Sui Southern Gas Company (SSGCL) and Sui Northern Gas Pipeline Limited (SNGPL) will hover around Rs 58 billion by the end of the current financial year despite an increase of 143 percent in gas prices on September 27.
Sources in Ministry of Petroleum said the recent increase in gas prices would inject an estimated Rs 94 billion to stabilize the two companies' financial health, an amount payable by consumers.
As a result of the Economic Coordination Committee's (ECC) decision on September 16, the combined revenue shortfall of the two gas utilities would decline from Rs 152 billion to Rs 58 billion.
Both SSGCL and SNGPL were in profit before the PML-N government came to power in 2013. Now both companies are operating with a deficit of Rs 152 billion. The cost of supplying gas has been rising however the sale price payable by consumers was not adjusted accordingly by the previous government for the past five years.
Purchase of natural gas from about 40 gas producers was at an average rate of Rs 629 per million British thermal unit (MMBTU) and selling at Rs 399 per unit, with a net loss of about Rs 230 per unit.
Price differential between system gas and imported liquefied natural gas (LNG) is a major contributor to a rise in receivables and payables of LNG rose to Rs 28 billion in September.
Former Director General Gas Ministry of Petroleum told Business Recorder that receivables of gas companies and the difference between the purchase price of gas companies and the sale price is the main reason for the increase in circular debt in gas distribution companies.
SNGPL's financial position has worsened due to settlement of two old disputes in courts thereby putting an additional burden of about Rs 53 billion on cash flows in just one year. The gas company suffered a financial impact of Rs 30 billion on account of a dispute on Tal Block that remained under arbitration between 2010 and 2017; and another Rs 23 billion burden was caused by a two year (2015-17) dispute over the Sui gas field that went against the SNGPL.
Till September 1, 2018, the SNGPL had total outstanding receivables of Rs 164 billion including Rs 21 billion from power companies, Rs 20 billion from all other consumers and Rs 123 billion from the government on account of price differential.
According to official of SSGC, the company's receivables total Rs 184.6 billion. The company is owed Rs 13.9 billion and Rs 55.5 billion receivables are against Pakistan Steel Mills and Rs 84.5 billion against K-Electric. Outstanding amount against general consumers stands at Rs 28 billion for RLNG. WAPDA owes Rs 2.7 billion.
Sources in OGRA said the system losses of the two gas companies are around eight percent higher than international best practices of five-six percent.
During July-February 2017-18, average natural gas consumption was about 3,837 million cubic feet per day (mmcfd) including 632 mmcfd volume of LNG, compared to 3,205 mmcfd in 2016-17.
The power sector continues to remain the largest consumer of gas, followed by the domestic sector.