As on June 30, 2010: SSGCL trade debt rose to Rs 43.82 billion: AGP

The trade debt of Sui Southern Gas Company Limited (SSGCL) has increased to Rs 43.82 billion as on June 30, 2010 from Rs 32.75 billion as on June 30, 2009, reflecting a 29.45 percent increase, the Audit Report 2010-11 revealed. The Audit Report 2010-11 of the Auditor General of Pakistan (AGP) says that finance cost increased by 13.7 percent from Rs 4.4 billion in the preceding year 2007-08 to Rs 5.1 billion during 2008-09.
SSGCL's reliance on debt was continuously increasing year by year. This was a sign of serious financial risk. Further, trade debt was Rs 32.568 billion as on June 30, 2009, which increased to Rs 43.815 billion at the end of 2009-10. In view of critical cash position, efforts towards recovery of receivables need to be made to avoid dependence on costly borrowings/swaps.
The report further says that the cash and cash equivalent at the end of 2009-10 were in negative (deficit) of Rs 3.1 billion, reason being addition of short-term borrowings liability of Rs 3.72 billion as on June 30, 2010. SSGCL needed to take aggressive measures to improve its liquidity and decline of 58 percent in cash and bank balances this year, the report said.
The report further says that there was an increase of 34.53 percent in June 30, 2010 debtors as compared to previous year. The company in its reply stated that Rs 31.25 billion out of this total balance was receivables from KESC, Wapda, and Pakistan Steel Mill and others ie, Rs 12.56 billion. The company had recovered Rs 10.93 billion (out of Rs 21.28 billion) from KESC, Rs 6.33 billion (out of Rs 8.258 billion) from Wapda and Rs 1.01 billion (out of Rs 1.7 billion) from Pakistan Steel Mills. The company needs to take more efforts to recover its dues within due dates hence the company should re-consider the existing policies/rules to safeguard itself from default amount.
The report says that further financial statements reflects that sales per customer declined by 3.027 percent, additional sales per km addition in distribution network was declined by 44.24 percent, New connections per km addition (distribution) were declined by 7.76 percent, and additional sales per new connection was declined by 39.55 percent, in comparison with last year.
The report revealed that the transmission and distribution expenses were increased by Rs 3.28 billion in 2009-10, registering an increase of 51.9 percent in comparison with last year against increments of 6.42 percent in distribution activity during 2009-10. This increase is mainly on account of increase in salaries, wages and benefits of Rs 2.940 billion in 2009-10 in comparison to last year.
Net volume of difference of gas purchase and sales after adjusting internal consumption in the Company's operations is termed as Un-accounted for Gas (UFG) Among other disallowances made by OGRA, the excess UFG was added to Gas Development Surcharge by reducing the profit. Actual UFG for the year 2009-10 was 35,010 MMCF, representing 8 percent against the target fixed by OGRA at 7 percent. In financial terms, this caused disallowances of Rs 934 million during the year as compared to 33,501 MMCF representing 7.9 percent causing disallowance of Rs 2.82 billion in the preceding year 2008-09 against target of 4.8 percent. Remedial measures are required to be taken to control the UFG.
The report says that the management's reply stating that major portion of UFG relates to domestic network and connections also alarm inefficiency of management towards control of UFG, as 66 percent of total customers belongs to Domestic-Karachi, and 38 percent (the highest amount among three regions) of total UFG reported for Karachi for the year 2009-10. Loss due to failure to control UFG in excesses of targets needs to be justified.
The audit observed that it is the cost that was paid against disallowed UFG by the company, but the government is losing GDS portion on this disallowed quantity (ie, the difference between prescribed price and customer price).