ISLAMABAD: Sui Sout­h­ern Gas Company Ltd on Friday annou­n­­ced that it had disconnected gas supply to Pakistan Steel Mills (PSM) for chronic defaults spread over a decade, totalling Rs98 billion, including Rs75 billion in interest and a late payment surcharge.

In a statement, the Karachi-based gas utility said the PSM started partially defaulting to SSGC in making payments of monthly gas bills from November 2008 and stopped making any payments after March 2015. Subsequently, SSGC served various termination notices to PSM in July and August 2015 due to continuous default on the latter’s part. In addition, due to continuous default, SSGC gradually reduced its gas supplies to PSM from 21 million cubic feet per day in 2014-15 to 2mmcfd in 2015-16.

However, the gas utility waived the disconnection notices several times to keep the PSM Coke Oven Batteries intact and also to help achieve the resumption of PSM operations in future revival plans. Since then, SSGC has been continuing 2mmcfd gas supplies with an average billing value of Rs100 million per month, but payments from PSM have remained erratic.

Upon consistent follow-up from SSGC, effective February 2020 onwards, PSM started making current monthly payments to SSGC in view of budgetary allocations and the release of funds from the Federal Government bailout package for paying SSGC gas bills. However, funds were released after a considerable time lapse, causing SSGC to bear the financial burden due to significant delays in payments.

The SSGC said the PSM was informed about a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet, at which 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 the federal government against SSGC could accrue.”

Therefore, SSGC sought clarification from PSM and served disconnection notice. However, PSM did not respond to the notice. Consequently, after the deadline’s expiry, SSGC disconnected gas supplies while keeping all relevant federal government ministries in the loop.

“Finally, the federal government also decided to discontinue its financial support to PSM to settle its payments to SSGC”, the statement said. “SSGC was thus left with no option but to discontinue gas supplies to PSM on July 4, 2024, later in the night,” it said.

The PSM was closed by the then PMLN government in June 2015 when its capacity utilisation incre­ased from less than 10pc to over 60pc and was anticipated to break even at 70pc. Over 17,000 acres of PSM land would now be used for setting up a new steel mill, most probably in the private sector, and the remaining part would be allocated for setting up an export processing zone.

Published in Dawn, July 6th, 2024