Payables by power cos to gas utilities: LPS on GDS hits alarming mark

ISLAMABAD: The amount of Late Payment Surcharge (LPS) on Gas Development Surcharge (GDS) payables by power companies to gas companies (PPL, MPL and SNGPL) has reached an alarming level of Rs76.399 billion, well-informed sources told Business Recorder.

In a letter to the Power Division, the Directorate General of Gas (Petroleum Division) has informed that that the Natural Gas (Development Surcharge) Ordinance, 1967, was promulgated to provide for levy and collection of a development surcharge on natural gas and for the matters connected therewith.

The Gas Development Surcharge (GDS) is essentially a differential margin of sale price and prescribed price of the natural gas meaning thereby that this differential margin will emerge when sale price exceeds the prescribed price under the said Ordinance and the Rules made there under.

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The net proceeds of GDS so collected are being transferred/distributed by the Finance Division to the provinces under the NFC Award.

According to DG (Gas), the gas companies included in the schedule of the said ordinance are supplying natural gas to power producing companies (WAPDA/FPDCL/ GENCO-II/PEPCO etc) and their invoices including GDS are paid late by these power sector companies, hence the gas companies are unable to deposit the GDS into government treasury in time and attracted LPS @ 20%/15% per annum under the ordinance and rules.

The audit authority while conducting audit activity each year had raised numerous LPS-related audit paras which remain unsettled due to non-payment of LPS on delayed payment of GDS. The Public Accounts Committee (PAC) in its meetings has advised time and again Petroleum and Power Divisions for resolution a settlement of the said issue in totality with the stakeholders concerned.

The Directorate General of Gas is of the view that the gas companies (PPL, MPL and SNGPL) have reached to an alarming level of Rs76.399 billion as on June 30, 2024. Of total payables of Rs76.399 billion, share of MPCL outstanding payables against, Genco-II and Foundation Power Company stood at Rs21.144 billion and Rs4.416 billion respectively, whereas, share of PPL against Genco–II reached to Rs50.736 billion and the SNGPL’s outstanding against WAPDA’s thermal power Guddu stood at Rs103 million.

In compliance with PAC directives, two meeting on the issue of LPS on GDS has been co-chaired by the secretaries of Petroleum and Power on May 25, 2023 and June 1, 2023.

Based on the discussion of both the meetings, reconciliation exercises between gas suppliers and gas purchasers were completed. However, the meeting acknowledged the LPS on GDS and its payment thereof is overdue from power plants.

The Directorate General of Gas is of the view that pursuant to the ECC’s decision of November 6, 2001, Wapda/Power Division was allowed to pay outstanding GDS liability at the rate of 7.5 per cent with the current bill as a settlement of arrears. The same arrangement can be agreed upon to clear the LPS on GDS liabilities.

Copyright Business Recorder, 2024