The circular debt within the gas sector has grown to quite Rs532 billion because the twin Sui companies fail to form payments to their suppliers on account of poor cash flows.
Owing to the inordinate delay within the publication of monetary accounts by the 2 gas companies, the precise figure for the sector’s circular debt is unavailable. But one proxy for the build-up of the inter-corporate debt within the gas segment shows the quantity stood at Rs532.2bn at the top of March, up 5.5 percent from June 2020.
Unpaid government subsidies meant for residential and export-oriented consumers have constrained the cash flows of Sui Northern Gas Pipelines (SNGPL) and Sui Southern gas service (SSGC). This has resulted in bloated receivables on the balance sheets of energy exploration companies — mainly the Oil and Gas Development Company (OGDC) and Pakistan Petroleum Ltd (PPL) — from the dual gas distributors.
While the govt has not formally defined what constitutes the circular debt within the gas sector, analysts use the receivables from the Sui companies on the books of OGDC and PPL as a proxy to living the extent of the circular debt.
The OGDC’s receivables from SNGPL and SSGC amounted to Rs272.3bn at the top of March. The corresponding figure on PPL’s record was Rs259.9bn.
According to the newest review of the loan program under the International fund (IMF), the general stock of arrears within the gas sector stood at 0.5pc of GDP in 2019-20. The IMF expected it to rise by a further 0.1pc of GDP by the top of 2020-21 on the rear of a widening cost-revenue mismatch.
Higher quantities of re-gasified liquefied gas (RLNG) will likely be diverted from the high-price power sector to the low-price domestic users, especially within the winter, further inflating the stock of circular debt.
“One possible option for the govt is to offer a subsidy to the Sui companies in order that they can settle their payables to state-owned OGDC and PPL. the 2 energy exploration firms can then pay a number of that cash back to the govt within the sort of dividends,” said an energy sector veteran requesting anonymity because his employer didn’t allow him to talk to the press.
“The only viable solution is to extend the tariff supported the weighted monetary value of gas,” he said while pertaining to the pricing mechanism that takes under consideration the blended costs of both indigenous and imported gas rather than the present pricing method that ring-fences the utilization of imported fuel.
The gas-producing, smaller provinces are opposing the thought of the weighted monetary value because they believe it’ll benefit Punjab at their expense.