By Staff Reporter
ISLAMABAD: The government gas utilities are facing financial collapse under growing liquidity pressures conjured by subsidies and circular debt, while no ‘understanding’ was in place to source cheap Russian gas, petroleum minister said on Monday.
“The two state-run gas distribution companies will go bankrupt if the gas prices for the consumers were not increased,” said Minister of State for Petroleum Musadik Malik said briefing the Senate Standing Committee on Petroleum.
“Especially, the Oil and Gas Regulatory Authority’s (OGRA) new rules limit the power of the federal government to cap its prices so it becomes inevitable now.”
The committee met under the chair of Senator Mohammad Abdul Qadir in the Chair.
Malik said the government did not have funds to finance the difference between the purchasing and selling price of the gas.
“The assets and profits of Sui gas companies are eroding and if they (SNGPL, SSGC) continued working like this bankruptcy won’t take long to ensue.”
The minister said after an amendment to OGRA rules the government’s powers to control the gas tariff were limited.
When asked what was the criteria for fixing the prices of gas and its distribution, Malik responded domestic consumers should be given the top priority in that regard. “Domestic users should be charged affordable rates and industrial units as per the sector concerned.”
The CNG sector should be allowed to import gas on its own to reduce the burden on the government, while gas distribution should be prioritised sector-wise, he added.
To this, Senator Mohammad Abdul Qadir, the chairman of the committee, said direct subsidy to the fertiliser industry was not sustainable.
Petroleum secretary informed the committee that the gas sector circular debt was standing at Rs1500 billion.
The chair sounded alarm over the mounting circular debt, stressing the need to find a permanent solution to this continuous financial conundrum.
To a question, Malik informed the committee there was no MOU (memorandum of understanding) regarding the purchase of cheaper gas from Russia.
The committee also discussed the relevant rules, which allow the oil marketing companies to mix the High Octane Blending Component (HOBC97) in fuels.
Malik said the ministry only regularises those products, which were utilised by the masses on a large-scale like RON 92 and HOBC97 did not fall in this category.
Senator Qadir advised the ministry to at least check the authenticity of this new product.
The minister briefed the committee about the grievances of Karachi industrialists over non-availability of gas for the last four months.
The committee chairman said the economy was deteriorating because of a yawning trade gap. “To bridge this trade deficit, we need to offer incentives and boost our local industries,” Senator Qadir said.
He asked the petroleum minister to pay attention to the concerns of Karachi industrialists and come up with appropriate solutions.
The committee also raised the issue of the Department of Explosives’ activities involving binding citizens to lease their properties to particular oil marketing companies for business purposes.
A spokesperson for the Ministry of Petroleum’s Department of Explosives said there was no truth in these allegations. “The explosives department only grants petrol pumps licences to oil marketing companies,” the spokesperson added. To this, Senator Qadir said the objective should be to create ease for doing business not difficulties.
The committee also discussed the Public Petition regarding the issue of meter tampering and overbilling referred by Chairman Senate. In his response, the chair of the committee said for this the services of an independent third party should be hired to help the authority detect theft scientifically.
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