Circular debt in gas sector grows to Rs 350 billion

December 03, 2020 (MLN): The growing circular debt is not only plaguing cash-bleeding power sector where it was accumulating at supersonic speed and crossed the Rs 2,253 billion mark, but now the circular debt in the gas sector is also on the scene, surging to Rs 350 billion due to various inefficiencies and policy errors.

According to the ‘The News’, firstly, the gas prices were not passed on by increasing tariff for some time. Secondly, the circular debt has also been piled up on the back of RLNG. Thirdly, the Unaccounted for Gas (UFG) is also causing the hike.

“At this moment, the circular debt built up into gas sector has touched around Rs 350 billion,” former Economic Adviser Dr Khaqan Najeeb told The News.

Unaccounted for gas (UFG) is causing huge losses and is becoming increasingly difficult to control under the current large unbundled system.

As per media group, there is a need to set up separate cost centers in the form of separate legal entities so that accounting and operational performance can be measured with great accuracy and reliability. Existing consumers are accustomed to lowering domestic gas prices and are unwilling to pay the delivered cost of LNG. This has created a significant discrepancy for utility companies. The power sector has not yet taken the expected volume of LNG and the zero-rated industry is not paying the full price of LNG. In addition, LNG is being diverted to lower-paying domestic consumers. Hence, the trend of cost-side revenue for utility companies is growing exponentially.

Considering piled-up difficulties, the government is planning an aspiring reform to improve the gas sector, under which the unbundling of two giants in different distribution companies is on the cards, The News said.

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