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ISLAMABAD: Sui Southern Gas Company Limited (SSGCL) has threatened to disconnect gas supply to Pakistan Steel Mills (PSM), including coke over batteries if agreed bills are not paid before December 1, 2020.

In a letter to Chairman PSM Board, Aamir Mumtaz, copy of which has also been sent to the Minister for Energy, Omar Ayub Khan, Acting Managing Director, SSGCL, Amin Rajput the company noted that it has written a number of letters to the PSM management on payment of bills, but there has been no progress.

PSM's affairs are being run by a non-professional board and management with many influential parties in competition to purchase its precious land for peanuts.

Privatisation Commission, has, cleverly given the task of PSM's privatisation to the Minister for Industries and Production, who runs his own steel business. The government has approved over Rs 16 billion technical supplementary grant for retrenchment of PSM employees, but not a single penny for payment of gas bills.

The payments against SSGC gas bills for June 2020 (partial) and from July 2020 till September 2020 (full) are overdue and still not paid by PSML resulting in accumulation of outstanding receivables from PSML while the monthly bill for October 2020 amounts to Rs.80.56 million overdue by 22 November 2020.

According to the letter, SSGC has always supported PSML in revival efforts despite the fact that PSML never honoured its commitments and continued to default on its long outstanding dues to SSGC while SSGC is still supplying around 2 MMCFD of gas to PSML valued at around Rs. 80 - 85 million per month.

Acting MD SSGCL maintained that consequent to ECC decision regarding transfer of funds of Rs 350 million, PSML started making payment on SSGC monthly gas bills wherein bills from February 2020 till May 2020 were paid. However, PSML has again started defaulting in its monthly gas bills from June 2020 (partial payment) resulting in dire financial consequences for SSGC.

"SSGC has been left with no option but to discontinue and disconnect the gas supply to PSML as SSGC cannot supply gas to PSML indefinitely without receiving full payments by PSML," he said, requesting that PSML should make payment of current monthly gas bills of June 2020 (partial) and from July 2020 till October 2020 (full) on or before December 1, 2020 and also provide concrete payment plan for the remaining outstanding balance, failing which SSGC shall be constrained to discontinue gas supply to PSML.

Article 27 read in conjunction with Article 38 (f) of the Gas Supply Agreement (GSA) of February 22, 1978 is not valid in this scenario as SSGC has already sent several termination notices to PSML. However, disconnection of gas supply was deferred in the lager public interest.

The total outstanding balance of PSML as of November 2020 was Rs 61.953 billion of which Rs 22.573 billion was principle and Rs 39.380 billion was Late Payment Surcharge (LPS).

Accordingly, PMSL has been advised that in the event of its failure in making the payment and providing a concrete payment plan, SSGC shall be compelled not only to discontinue deliveries of natural gas to the plant but also terminate the GSA without any further notice. SSGC will not be responsible for any consequences including damages to blast furnaces or coke oven batteries and any other consequential damages suffered by PSML. Therefore, PSML is advised to take appropriate measures promptly.

Copyright Business Recorder, 2020