Gas utilities on verge of bankruptcy, court told

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ISLAMABAD: The country’s two main gas utilities told the Supreme Court on Monday that they could go bankrupt if they were penalised for not meeting the international standard of maintaining gas losses at three to five per cent of the total supply.


Their overall losses currently stand at 16 per cent.


“The money that will be required to be injected by the federal government to put the companies back to their feet would cost the national exchequer far, far more than what Ogra naively aims to save through prescribing unrealistic, unlawful and plainly wrong UFG targets,” said a reply filed by advocate Abid Hassan Minto.


The counsel for the Sui Northern Gas Pipelines (SNGP) and the Sui Southern Gas Company (SSGC) requested the court to withhold its decision to the extent of gas losses, or unaccounted for gas (UFG), because the Lahore High Court (LHC) and the Sindh High Court were seized with similar issues. The LHC has already reserved its ruling on the matter.

He submitted the reply to a two-judge bench headed by Justice Jawwad S. Khawaja, which is hearing a case about CNG prices.


During proceedings of the case the court realised that CNG consumers as well as CNG station owners were suffering for the last two months amid a deadlock over the tariff issue and expressed the hope that the government and the Ogra (Oil and Gas Regulatory Authority) would take prompt action to settle the dispute.


The authority had to fix new prices but only after receiving fresh guidelines from the government — an issue which was expected to be taken up during a cabinet meeting on Tuesday (today), advocate Salman Akram Raja, who was representing Ogra, said.


However, Petroleum Secretary Dr Waqar Masood said his ministry had not received any notice that the issue was on the agenda for the cabinet meeting.


Meanwhile, justifying the UFG at about 16 per cent, the two companies expressed fears that they were on the brink of bankruptcy. If they did go bankrupt gas supply to most parts of the country would be suspended.


As a result, the government would be left with two options — either to auction the companies at throwaway prices or bail them out which would mean that they would join the ranks of PIA, Pakistan Railways and the Pakistan Steel Mills, the reply said.


The two companies had to keep in mind the larger socioeconomic benefit to the people since they provided a public utility, it said.


The great size of their pipeline networks was a vital factor that contributed to the increase in UFG and the international standards referred to could not be taken into consideration because a majority of foreign networks were not as large as those of the SNGP and the SSGC, the reply said.


Besides, a large part of their networks was 40 years old and prone to corrosion because of saline soil conditions.


The poor law and order situation in the remote areas of Khyber Pakhtunkhwa and Punjab was also a reason for the high ratio of UFG because it was almost impossible to control gas losses there, the reply said. There was no hope of improvement in the situation in the near future either.


Officials of the two companies had been facing death threats which had created a feeling of insecurity among them, it said, adding that the situation had eroded the capacity of the companies to control UFG.


Meanwhile, the court expressed confidence that all the CNG station owners would furnish their audited accounts required to ensure fairness and transparency in the fixing of new CNG tariff by the Ogra.


Advocate Raja told the court that of the 3,395 CNG stations across the country only 400 had submitted their account details.


The court adjourned the hearing till Thursday.


Courtesy:  Dawn

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