The Sui Southern Gas Company (SSGC) has taken the drastic measure of disconnecting gas supply to Pakistan Steel Mills (PSM) due to the latter\’s failure to pay its outstanding bills since 2008. Despite numerous notices and partial payments, PSM has failed to clear its dues, leaving SSGC with no choice but to take action.
The issue dates back to November 2008, when PSM started defaulting on its monthly payments to SSGC. The default continued intermittently until March 2015, when PSM stopped making payments altogether. SSGC served various termination notices to PSM in July and August 2015, but the steel mill failed to respond.
In a bid to support PSM\’s revival plans, SSGC waived the disconnection notices several times and continued supplying gas at a reduced quantity of 2 MMCFD, down from 21 MMCFD in FY 2014-15. However, the payments by PSM remained erratic, and the government\’s release of funds in 2020 was delayed, causing a significant financial burden on SSGC.
Recently, the Economic Coordination Committee (ECC) of the cabinet decided that no further payments would be made against the consumption of gas supply to PSM beyond June 30, 2024. This decision was communicated to SSGC, which sought clarification from PSM but received no response. Consequently, SSGC disconnected gas supply to PSM on July 6, 2024, after the expiry of the deadline.
The disconnection of gas supply is a significant blow to PSM, which was already struggling to stay afloat. The steel mill has been facing financial difficulties for years, and the government has been trying to revive it through various measures, including budgetary allocations and privatization plans. However, the revival plans have yet to bear fruit, and the disconnection of gas supply is likely to further exacerbate the situation.
The move by SSGC is seen as a drastic measure aimed at recovering its outstanding dues from PSM. The gas utility company has been facing financial difficulties due to the non-payment of bills by PSM, and the disconnection of gas supply is likely to impact the steel mill\’s operations significantly.
In a statement, SSGC said that it had been supplying gas to PSM at a quantum of 2 MMCFD with an average billing value of Rs100 million per month. However, the payments by PSM had been erratic, and the company had been facing significant delays in receiving its dues.
The disconnection of gas supply to PSM is likely to have significant implications for the steel industry in Pakistan. PSM is one of the largest steel producers in the country, and its closure is likely to impact the supply of steel to various industries, including construction and manufacturing.
