ISLAMABAD: The Cabinet Commit­tee on State-Owned Enterprises on Thurs­day rejected a request for exemption from international accounting and financial reporting standards for two circular debt-hit state-owned gas utilities — Sui Southern Gas Ltd (SSGL) and Sui Northern Gas Pipeline Ltd (SNGPL) — to avoid the two being declared insolvent.

However, the cabinet committee led by Finance Minister Muhammad Aurangzeb “instructed the Petroleum Division to undertake further deliberations with the Finance Division and the Law and Justice Division and submit a revised proposal for consideration,” said an official statement.

The Petroleum Division had sought exemption ‘for specified energy sector state-owned enterprises (SOEs) from the applicability of International Financial Reporting Standards (IFRS-14 and IFRS-9),’ the statement added.

Informed sources said a similar three-year exemption had already been availed by these entities. The finance minister reportedly observed that such an exemption could not be granted in such a hurry, given that the SOEs Act 2023 has been in place. Therefore, he directed that the matter, being of a serious nature, should be deliberated at length, given the strong opposition from the Central Monitoring Unit (CMU) of the Ministry of Finance, which monitors all SOEs in accordance with the requirements of the International Monetary Fund (IMF).

Rs3.442tr circular debt puts SSGC and SNGPL at insolvency risk

Sitting on a mammoth Rs3.442 trillion gas sector circular debt, the applicability of IFRS-9 and 14 could have required provisions for liabilities, many of them also unrecoverable but some others recoverable from other SOEs, thus evaporating their equity despite reasonable billing cashflows to meet their operations.

The official said the two entities supported by the Petroleum Division wanted their accounting and reporting standards to continue in line with the old “Generally Accepted Accounting Principles (GAAPs)” for operation under a regulated business model.

IFRS-9 required classification of asset-based business model and cash flow characteristics, including expected credit loss and impairment model. According to the International Accounting Standards Board — a global body — “IFRS 9 requires an entity to recognise a financial asset or a financial liability in its statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, an entity measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability”.

The IFRS-14 required reporting deferrals for regulated entities. The CMU believed both rules should be applied for the purpose of transparency as required under the SOE Act in the accounts and financial results, along with proper footnotes to cover how receivables will be settled as part of the circular debt management plan currently under discussion with the IMF.

The cabinet body also did not approve two board members each from the Petro­leum Division on the boards of directors of two other SOEs — Pakistan Petroleum Ltd (PPL) and Sandak Metals Ltd (SML) — finding this against good governance standards.

It, nevertheless, approved the other board members and directed that one member each from the petroleum division should be nominated to the PPL and SML boards. The nominations would subsequently be formally approved by the federal cabinet.

An official statement said the committee “emphasised that the composition of the Boards of State-Owned Enterprises sho­uld remain fully aligned with the principles of good governance and the provisions of the State-Owned Enterprises (Ownership and Management) Act and Policy, including the principle of limiting representation from the sponsoring Ministry/Division to one ex officio Director on each Board”.

The meeting also considered a summary submitted by the Ministry of Industries and Production regarding the categorisation of the Small and Medium Enterprises Development Authority (Smeda). The committee approved the proposal to exclude Smeda from the list of SOEs in view of its statutory and non-commercial nature.

Published in Dawn, July 10th, 2026