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KARACHI: This is with reference to the news article entitled ‘UFG – the elephant in the room’ carried by the newspaper yesterday. For the sake of setting record straight on some issues, please find below SSGC’s clarification:

“It is important to point out that UFG has a relativelysignificant impact on Circular Debt and there are other major factors that caused circular debt to reach to the current alarming level.It is mainly delayed price increases over the period which caused accumulation of Gas Development Surcharge (GDS) in the balance sheet of sui companies and impeded their capacity to pay to E&P companies, beside other factors like diversion of RLNG to domestic and other sectors. Nevertheless, UFG is an important topic in relation to the performance of gas utility companies.

Accordingly, it is important for a utility company like SSGC to clarify its correct position and impact. Losses due to UFG above OGRA benchmark are borne by SSGC on its balance sheet which are miniscule in comparison to the circular debt that has run into a whopping trillions of rupees, as documented.

“In order to control UFG, SSGC has been following a stringent UFG-reduction plan. Through diligent efforts during the last five years, UFG has been reduced by around 40% in terms of volumes whereas the UFG percentage has decreased by around only 4%. The reason for apparently lower reduction in terms of percentage is the sharp depletion of natural gas supplies which is a key factor in UFG computation.

SSGC has been facing the massive challenge of unauthorized usage of gas (theft) in the domestic sector in its franchise areas of Sindh and Balochistan. Out of the total current UFG quantum, around 65% is contributed by unauthorized usage in domestic sector; 85% of which originates in the Balochistan region where pipeline gas is consumed chiefly for residential usage. On the other hand, Karachi, where almost 70% of SSGC’s gas is being distributed, contributes towards unauthorized residential usage by around 15%.

“Reasons for unauthorized usage in domestic sector are elaborated below:

Unauthorized Gas Usage in Balochistan Region

Extraordinarily high demand of natural gas exists in the region during the winter season wherein the population depends on this convenient fuel for space and water heating during the sub-zero temperatures. On the other hand, the capacity to pay monthly bills is very limited. Resultantly, gas theft/ unauthorized usage of gas is rampant in the region with ‘meter tampering’ being themost commonly observed practice.

“Unauthorized Gas Usage in Karachi Region

In Karachi, SBCA has imposed restrictions on providing legitimate utility connections (including water and sewerage, electricityand natural gas) through clause No.18-G (i) of the SBCO (Amendment) Act – 2013. Under this Act, all newly constructed buildings and societies need to obtain NOC from SBCA before applying for valid utility connections. Since many fail in obtaining the necessary NOCs, the residents of such properties resort to gas theft to fulfill their needs. The Data in this regard, indicates that around 0.5-0.7 million users in Karachi City are involved in unauthorized usage of gas.

“SSGC has made extraordinary efforts to implement Gas Theft Act in industrial and commercial sector for which special Gas Utility Courts and Police stations have been established in different cities of SSGC’s franchise areas. These efforts have brought considerable results in curtailing gas theft in the said sectors. However, the Act is quite lenient towards domestic consumers. Hence, the solution of this issue is outside the operative control of a gas distribution company.

“Therefore, contrary to the perception, such UFG volumes are not possible to be ‘diverted’ to bridge the demand-supply gap of natural gas in other sectors like electricity generation. However, the financial recovery of such volumes is possible through implementation of amicable solutionsin respect of abovementioned issues.

“Remaining Gas Losses due to Technical Issues

UFG in SSGC system due to technical issues, which are within company’s operative control, is only around 16 BCF per annum which includes line losses andmeasurement errors (around 50:50 in proportion) which is comparable to any international operator in the gas distribution business. It is important to note that this quantum is well within the UFG benchmark permissible by OGRA, given the size and scale of operations of the Company.”

Copyright Business Recorder, 2023

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