KARACHI, Sept 2: The Sui Southern Gas Company has warned that it can stop the supply of natural gas to the Karachi Electric Supply Company if the power utility does not clear its outstanding dues, but it is not doing so only for the sake of the people living in the city.

A statement released by the SSGC on Sunday said: “The SSGC has been supplying natural gas to KESC on an average of 200 million cubic feet per day (MMCFD) even though the written agreement between both the companies was only for 10 MMCFD.”

It also said that the KESC had only been paying regular dues for the last six months while the older dues had accumulated to Rs.39 billion.

The statement also said that the SSGC continues to supply gas to the power utility only in the interest of the people living in Karachi and protect the national economy. “The company is not considering the commercial aspect in this regard, otherwise SSGC has a right to stop gas supply to KESC if the dues are not paid.”

In their response to SSGC, the KESC said that the amount payable is Rs.28 billion, not Rs.39 billion, as claimed by the SSGC, and the agreement referred to by SSGC does not exist. “It is quite unfortunate that SSGC keeps referring to a supply agreement which does not exist, while the fact of the matter remains that SSGC has been shying away from KESC’s offer to sign a Gas Sale Agreement (GSA),” said a KESC spokesperson on Sunday.

The power utility claimed that since since September 2008, it has had paid an accumulated amount of Rs.96 billion to SSGC.

It should be remembered that the federal and provincial government departments and state-run utilities also owe KESC more than Rs.76 billion, creating massive cash flow issues for the company. “This reflects the fact that the amount to be received by the government is significantly higher than the Rs.28 billion payable to SSGC and it can only be adjusted by the ministry of finance,” the KESC spokesperson pointed out. The KESC also said that the amount payable to SSGC has to be settled against the Rs.18 billion, which are to be paid by Karachi Water & Sewerage Board to KESC.

The KESC spokesperson claimed that his company had offered SSGC to sign a GSA for 400 MMCFD of gas supply to its generation plants, which will not only reduce load shedding in the city but will also help in reducing the power tariff for its consumers, since the utility will use less furnace oil which is 370 per cent more expensive. He said that currently the KESC was being supplied approximately 50 per cent of its natural gas requirement, which is a loss not only in terms of idle capacity but was also tantamount to public disservice since the utility was in a position to increase its power production, provided that SSGC stepped up to the task.

The spokesperson said that the KESC, also in larger interest of the people, was ready to ‘extend its hand to SSGC as a gesture of goodwill and agree to work on an expedited payment plan for the clearance of dues, provided that SSGC reciprocates in public interest and agrees to sign a Gas Sale Agreement (GSA) for the provision of 400 MMCFD gas to KESC’.

In the end, the spokesperson said that any decrease in gas supply by the SSGC will cause power cuts and will be counter-productive to the interests of residents and commercial activities.