Onward payment to PSO, PPL: DG (Gas) writes to PD for payment of TDS to KE

ISLAMABAD: The Director General (Gas) Petroleum Division has approached the Power Division for early release of Tariff Differential Subsidy (TDS) to K-Electric for onward payment to PSO and PPL against supply of RLNG.

The SSGC is supplying gas to KE on best endeavour basis on a commitment to pay the gas bills on due dates since 2012, as a consequence of order of Sindh High Court. However, since May 2022, KE has started to default in making timely payments to SSGC against weekly RLNG bills.

DG (Gas), Abdul Rasheed Jokhio, in a letter to Secretary Power Division, stated that due to financial constraints owing to delay in payment of RLNG bills by KE and in order to meet commitments with SNGPL, SSGC proceeded with encashment of bank guarantee provided by KE as Security Deposit to mitigate adverse financial implications to RLNG supply chain and international default by the LNG buyers namely PSO & PLL. However, KE obtained stay against encashment.

He maintained that SSGC has been in continuous communication with KE pursuing payment of outstanding dues but KE is associating its default in payment of RLNG over dues with non-receipt of Tariff Differential Subsidy (TDS) from the Federal Government.

In this regard, SSGC apprised that KE default as of August 01, 2022 has reached Rs26 billion (including LPS of Rs900 million) leading to a situation beyond SSGCs control whereby SSGC will be constrained to gradually reduce gas supplies to KE.

DG (Gas) has requested the Power Division to take appropriate measure for release of TDS against the claim raised by KE enabling KE to clear its dues.

According to KE, its TDS claims for April to June 2022 were Rs56.4 billion which have been sent to Power Division, requesting the latter to notify them along with pending determinations as significant amount of TDS is stuck up due to pending notifications of the Schedule of Tariffs (SoTs), consequently impacting the working capital position of the company.

KE’s TDS issue: SSGCL seeks PD’s help

On July 27, 2022, in a letter to Secretary Petroleum, Ali Reza Bhutta, Managing Director SSGCL, Imran Maniar shared previous correspondence with KE and Petroleum Division, in which SSGC noted KE’s continued default in making RLNG bill payment to SSGC and subsequently obtained a Stay Order from Sindh High Court against encashment of Bank guarantees.

Petroleum Division was informed that Moonis Alvi, CEO, KE visited SSGC offices on July 22, 2022 and held a meeting with SSGC management in which KE assured the gas utility company that it would release Rs5 billion plus Rs2 billion against RLNG bill payment during the current week, to maintain overdue amount at Rs18 billion, and will be paying current bills, subsequently.

He also requested for increase in indigenous gas supplies from 10 mmcfd to 20 mmcfd, which is not possible for SSGC with current indigenous gas supply numbers. However, SSGC had not received payment.

In case KE honours its commitment, and SSGC receives Rs. 7 billion from KE, the SSGC receivables would be reduced to the level of Rs18 billion.

For clearance of remaining receivable of Rs18 billion, SSGC management requires Petroleum Division’s intervention to take up the subject matter with Ministry of Finance and ECC for early resolution of KE Tariff Differential Subsidy (TDS).

SSGCL argued that release of KE subsidy would enable KE to clear its dues to SSGCL which would be paid to SNGPL for onward remittance to PSO to save it from international default.

MD, SSGC said that Petroleum Division is well aware of the fact that SSGCL is severely trapped in circular debt crisis. Moreover, liquidity issues including non-receipt of payment from industrial consumers like KE has severely affected RLNG supply chain and its effects are so severe that PSO is on the verge of international default and only KE’s timely payment can resolve this grave issue.

Copyright Business Recorder, 2022