Gas sector circular debt

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CIRCULAR debt in gas sector has emerged as a new spectre for the economy and fiscal health of the state.

The regrettable part is that no serious effort has been made to address this issue either in the power or the gas sector and the result is that it is building up with each passing day.

The government has now reportedly developed a comprehensive plan to address Rs 1,640 billion circular debts in the gas sector.

The plan includes securing dividends of Rs 800-850 billion from the two gas utilities, SNGPL and SSGCL, as well as increasing tariff and adjusting existing slabs to protect lower income consumers from a rise in gas prices.

Different options have also been considered to stop piling up of circular debt because of non-payments within the state-owned enterprises (SOEs).

We understand the deadlock with the IMF compelled government to pursue the course but taking some bitter and hard decisions have become important for financial sustainability of the gas sector.

Reforms indeed are need of the hour to put matters in the right direction. While government is considering a massive increase of sixty to seventy eight percent in the gas tariff, we will suggest that considering the problems faced by consumers due to price hike, the hike should be made in a phased manner.

At the same time, there is a need to check system losses. Over the last three years both the gas utilities have not been able to achieve loss reduction targets.

While our gas import bill is surging, the SSGCL was required to reduce its losses by 9.55 percent but it completely failed as its actual losses slightly increased over the period.

Over the same period, SNGPL failed by a margin of 0.2pc to meet its target of cutting losses by 4 percent.

The gas companies must take corrective measures to check the losses that in turn have compounding impact on the revenue shortfall.

As gas reserves are fast depleting, emphasis should also be given to accelerate new exploration.