KARACHI: The Pakistan Steel Mills (PSM) has constantly been defaulting on its payments to the Sui Southern Gas Company (SSGC), said SSGC in a press statement released on Saturday.

The spokesperson for SSGC commented that the Pakistan Steel Mills stood today at a staggering default of Rs35 billion, which has made it difficult for the gas utility to finance its programs of strategic nature, including pipeline augmentation projects across its franchise areas.

He elaborated that since the last four years, PSM’s outstanding receivables have continued to rise.

“In July 2012, PSM’s overdue balance with SSGC stood at Rs8.3 billion. By the same time period in 2013, the balance had shot up to Rs15 billion. Since then, the receivables have continued to mount uncontrollably and by July 2014, the balance had risen to Rs24 billion. Today, PSM’s arrears total an amount of Rs35 billion,” said the SSGC spokesperson.

He expressed concern over the matter, saying that the escalating amount of receivables has made it increasingly difficult for the company to make payments to local and foreign companies for purchase of gas as well as to meet other commitments.

The spokesperson also revealed that the PSM has not paid any amount to the Sui Southern Gas Company since April 2015.

He added that since the last few years, SSGC has continuously reminded PSM of its mounting dues, both through verbal and written notices, but has always stopped short of suspending gas supply to it.

SSGC has given PSM ample opportunity and time to settle its dues through a steady supply of gas but the latter has continued to show a total lack of seriousness in this regard. PSM is not even offering a palatable payment plan for the settlement of large overdue balances, in-spite of providing them many opportunities for doing the same.

The spokesperson added that every time a notice was served to PSM, it made a commitment to settle its dues. However, PSM repeatedly faltered on its commitment.

While recovering dues from corporate customers, the gas company follows a policy of gentle persuasion and when it notices failure in compliance from the consumer’s end and debts keep piling up, the suspension of gas supply becomes inevitable.

According to the media release, the PSM has itself taken SSGC to a point where it had no option but to cut gas supply to it.

SSGC had reduced gas pressure to PSM since June 10, which resulted in low production and adversely affected the smooth running of the plant.

In July 2015, SSGC served a notice to PSM, asking it to submit an acceptable payment plan along with a down payment and a firm assurance that it will settle the remaining amount. However, PSM remained unmoved.

Another notice was served to PSM earlier in August with the same requisitions. It clearly stated that in the event of failure in making the requisite payment, SSGC would be compelled to not only discontinue deliveries of gas to the plant but also terminate the Gas Sales Agreement (GSA) without any further notice at PSM's sole risk.

Earlier in August, a PSM official said the SSGC bills of Rs35bn were exaggerated as actual dues stood at around Rs17bn and the rest were penalties which should have settled between the two government entities with the intervention of the federal ministries.

The spokesperson of SSGC commenting on the behavior of PSM management, said that instead of making any firm commitment towards settling its dues, PSM has unfairly blamed the Ministry of Petroleum and SSGC's chairman for cutting gas supplies, asserting that their action has hampered its ability to run its plants productively.

“PSM may be drowning but why is it that it wants other organizations such as SSGC to drown with it?”

Read: Pakistan Steel chief complains of unfavourable treatment

Earlier in the month, PSM had sought around Rs5 billion from the federal government along with postponement of gas bills to avoid complete shutdown, after being standstill on heat-mode for 56 days with zero production.

The Sindh Chief Minister Qaim Ali Shah in July expressed deep concerns over the discontinuation of gas supply which was to be effective July 28, and directed the managing director of SSGC to ensure uninterrupted supply, as well as maintain production levels.

He said that he would take up the matter with the federal government and in case of a cold response would take it up in the Council of Common Interests agenda.

Read: SSGC told to resume supply to Steel Mills

The SSGC spokesman told media that PSM also alleges that due to gas cuts, it is unable to pay salaries to its staff.

“This argument seems illogical since the payment of salaries is being made through the Government's bail-out package.”

He further added that if PSM continues to default on its payments, its action will have a major impact on the financial health of SSGC, forcing derailment of its capital expenditure projects.

The spokesperson urged the PSM to rethink its policy towards SSGC regarding the payment of its dues.