According to an SSGC official, KESC owes PKR 43 billion for gas supply and Pakistan Steel Mills has to pay PKR 10 billion. Sui Southern Gas Company has sought up to 10% increase in gas tariff for all types of consumers, following a rise in wellhead gas prices, from July this year.

To consider SSGC’s request and seek views of the people, the Oil and Gas Regulatory Authority held a hearing, presided over by the regulator’s chairman, in Karachi on Tuesday April 23rd 2013.

Ogra said that “During the proceedings, the regulator asked SSGC to recover huge unpaid bills of PKR 53 billion from Karachi Electric Supply Company and Pakistan Steel Mills. SSGC should take immediate measures to recover the dues from defaulters, which were eroding the profitability of the company.”

According to an SSGC official, KESC owes PKR 43 billion for gas supply and Pakistan Steel Mills has to pay PKR 10 billion. The official said that “We have sent a notice to the steel mill, warning it of disconnecting gas supply if a significant amount is not paid until April 26th.”

In Balochistan too, SSGC loses much because of poor law and order situation. The official said that the company sold 5% of its total supply in Balochistan but the province contributed 30% to the unaccounted-for gas level, a term used to describe gas theft and leakage.

According to a statement issued by SSGC, the company asked for a price increase of PKR 31.56 per million British thermal units for all categories of consumers domestic, commercial and industrial from July this year. At the hearing, SSGC Managing Director Mr Zuhair Siddiqui and senior management of the company were present.

SSGC Counsel Mr Mirza Mahmood pointed out that according to the company’s licence, Ogra should determine the revenue requirement and ensure that the company was able to achieve a minimum 17% return every year. Ogra had been in continuous breach since the 7% UFG benchmark was introduced.

The counsel argued that the 7% UFG would result in only 2.3% increase in the price of natural gas. He said that “This increase will enhance the gas bill from PKR 210 to PKR 215 per month for at least 50% of domestic consumers, a very small cost but will save the company, a national asset from bankruptcy and financial collapse.”

The counsel warned that if present difficult conditions persisted, SSGC, which is well respected for operational efficiency and profit making, would go the way of other failed institutions like PIA, Wapda or steel mill.

He added that “If the Sindh High Court ruled against the company and the price of gas was not increased by PKR 31.56 per mmbtu, the entire share capital and reserves of the company would turn into a negative equity of PKR 5 billion.”