ISLAMABAD: A plan to reduce the gas sector circular debt by Rs543 billion through a dividends ploughing back scheme has drawn flak from major gas producer — OGDCL — who says it was not consulted by the previous PDM government.
The proposal, which was shared with the International Monetary Fund (IMF), involves the government injecting funds into the state-owned gas companies Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL) to clear their outstanding dues to gas producers such as Oil & Gas Development Company Ltd (OGDCL), Pakistan Petroleum Ltd (PPL) and Govt Holdings Pvt Ltd (GHPL).
In return, the gas producers would pay dividends to the government from their retained earnings.
However, OGDCL, the largest energy sector firm in the country, said in a statement on Friday that it had not received any formal communication from the relevant authorities about the plan and that any information in circulation might be speculative.
In a press release issued by OGDCL here on Friday after the ODCL Board meeting held on August 10, 2023, and August 17, 2023, saying that several news articles have recently addressed the issue of circular debt settlement.
OGDCL board would like to clarify that, as of today (Friday), it has not received any formal communication from the relevant authorities. So, any information in circulation about a settlement plan might be speculative. OGDCL board says it will encourage stakeholders and the public to rely exclusively on official communications for accurate information.
“We did not see the proposal nor has it been shared with OGDCL by the authorities of the petroleum division and finance division who finalized the proposal to reduce the gas sector circular debt, an OGDCL spokesman told The News.
He added, “We want to see the proposal and may find the opportunity to improve it. However, through book settlements, the proposal to reduce the gas sector debt by Rs543 billion is in question.”
He said that both the gas companies have defaulted payments of Rs1.3 trillion to public sector exploration and production companies and that they were also facing a shortfall of Rs560 billion and waiting for an increase in gas prices by 45-50 percent.
The OGDCL spokesman also said that in both the gas companies’ boards, there must be a member from OGDCL to examine the performances of the gas companies. “The payments from gas companies are the doable solution to curtail the circular debt,” he added.
Under the proposal, the federal government would inject funds around Rs414bn into the Sui Northern and Sui Southern gas companies through supplementary grants for payment of outstanding dues to gas producers – Oil & Gas Development Company Ltd (OGDCL), Pakistan Petroleum Ltd (PPL) and Govt Holdings Pvt Ltd (GHPL).
Out of these funds, SNGPL and SSGCL would clear outstanding liabilities of about Rs225bn to OGDCL, Rs62bn to PPL and Rs127bn to GHPL. On top of these, OGDCL and PPL would arrange about Rs56bn on their own and partially liquidate some of the investment bonds.
In return, the three gas producers would pay Rs475bn dividends to the federal government on their retained earnings, estimated to be around Rs1.44 trillion as of June 30, 2022. The government currently holds 100pc stakes in GHPL, 85pc in OGDCL and 75pc in PPL.