SSGC disconnects gas supply to Pakistan Steel Mills

Pakistan Steel Mills Limited (PSML) started partially defaulting to SSGC in making payments of monthly gas bills in November 2008 and stopped making any payments after March 2015. Subsequently, SSGC served various termination notices to PSML in July and August 2015 due to continuous default on the latter’s part. In addition, due to constant default, SSGC gradually reduced its gas supplies to PSML from 21 MMCFD in FY 2014-15 to 02 MMCFD in FY 2015-16.

However, SSGC waived the disconnection notices several times to keep PSML’s Coke Oven Batteries intact and also to help achieve the resumption of PSML operations in future revival plans. Since then, SSGC has been continuing gas supplies to PSML at a quantum of 2 MMCFD with an average billing value of RS. 100 million per month, but sadly, payments from PSML remained erratic.

Upon consistent follow-up from SSGC, effective February 2020 onwards, PSML started making current monthly payments to SSGC in view of budgetary allocations/bail-out package release of funds to it from the Federal Government for making payments of SSGC gas bills. Funds were, however, being released after a considerable time lapse, causing SSGC to bear the financial burden due to significant delays in payments.

Federal Government, including the Privatization Commission, Ministry of Industries and Production and Ministry of Energy (Petroleum Division), had been working on revival plans of PSML during various times, and SSGC always supported the efforts of the Federal Government primarily by continuing the gas supplies to PSML during this entire period. A recent such development was initiated in 2021, wherein a proposal regarding transferring PSML’s core assets and relevant land to a new subsidiary company was floated. SSGC remained active while safeguarding its interest in facilitating the privatisation process of PSM. The privatisation process, however, did not materialise.

Through a written communication from PSML, SSGC was informed regarding a recent ECC meeting, wherein it was decided “that no further payment against the consumption of gas supply to PSM will be made beyond June 30, 2024, so that no further liability of Federal Government against SSGC could accrue”. Given this, SSGC sought clarification from PSML and served a Disconnection Notice. However, PSML did not respond to SSGC’s notice and consequently, SSGC, after the deadline’s expiry, disconnected gas supplies to PSM while keeping all relevant Ministries / Federal Government in the loop.

To reiterate, to support PSML’s revival efforts, SSGC has always fully supported the former by supplying it with gas against partial payments / delayed payments / non-payments. SSGC provided PSML with several opportunities to honour its commitments. However, PSML not only defaulted on payments of gas bills but also could not offer any palatable Payment Plan of its outstanding dues. Finally, the federal government discontinued its financial support to PSML to settle its payments to SSGC. SSGC was thus left with no option but to discontinue gas supplies to PSML on July 4, 2024, later at night.

It must be mentioned here that total outstandings against PSML as of June 30, 2024, amount to Rs. 97.697 billion, which includes a Late Payment Surcharge (LPS) of Rs. 73.4 billion. The outstanding principal amount has accumulated since 2008 due to non-payment / partial payments by PSML.

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