SSGC warns PSM of gas disconnection

ISLAMABAD: The Sui Southern Gas Company Limited (SSGC) has warned Pakistan Steel Mill Ltd. (PSM) of disconnecting their gas connection if the company fails to pay Rs61 billion in outstanding gas bills.

Sources privy to the information told Profit that the SSGC has written a letter to PSM Chairman Aamir Mumtaz in this regard.

Sources said that the company’s outstanding SSGC gas dues include a partial bill from June 2020 and full bills from July till September 2020, while the monthly bill for October, which amounts to Rs80.56 m, will also be overdue if not paid by November 22. 

According to the letter written by the utility company, the SSGC has still been supplying around 2 MMCFD of gas to PSM valuing around Rs80 m to Rs85 m per month. Consequent to the ECC’s decision regarding the transfer of Rs350 m funds, PSM paid its bills from February till May, however, the company started defaulting again from June, resulting in dire financial consequences for SSGC.  

In view of the above, SSGC has been left with no option but to disconnect the gas supply to PSM as it cannot supply gas to a mill without receiving full payments, therefore, PSM is requested to clear its dues on or before December 1, 2020, and also provide a concrete payment plan for the remaining outstanding balance, failing which SSGC shall be constrained to take action the steel mill, the letter states.

Please note that Article 27 read in conjunction with Article 38 (f) of the Gas Supply Agreement (GSA) dated February 28, 1978, is not valid in this scenario as SSGC has already served several terminations notices to PSM. However, disconnection of gas supply was deferred in the larger public interest, the letter adds.

Sources said that the total outstanding balance of steel mill stands at Rs61 bn in which Rs22 bn is the principal amount and Rs39 bn is late payment surcharge. 

The SSGC has also warned that not only would it discontinue natural gas supply to the plant, but also terminate the Gas Supply Agreement (GSA) without any further notice.

“SSGC will not be responsible for any consequences including damages to blast furnaces or coke oven batteries and any other consequential damages suffered by PSM,” the letter concludes.