ISLAMABAD:
Pak-Arab Refinery Limited (Parco) has refused to provide diesel, jet fuel and kerosene oil to Pakistan State Oil (PSO) on credit, a move that may halt supplies to Pakistan Army, airlines and other consumers across the country.
Pakistan is the major shareholder in Parco with 60% followed by Abu Dhabi government with 40% stake in the country largest refinery. The three products accounted for around 32% of PSO’s total sales in October.
Parco is reluctant to provide fuel supplies of the three products on credit to PSO and wants it to clear its pending dues first before getting more supplies, sources said adding that a high-level meeting chaired by petroleum secretary Ijaz Chaudhry was held on Tuesday to find a resolution.
Sources told The Express Tribune that cash-strapped PSO had scrapped plans to import diesel worth Rs4 billion after the petroleum ministry directed to purchase oil from local refineries and then opt for import, a move that may prove to be a fatal blow to the largest oil marketing company’s operations.
Secretary Petroleum Ijaz Chaudhry has bound PSO to pay 50% of the total amount of supplies purchased from Parco.
However, PSO is not in a position to purchase oil from Parco at 50% advance payment due to liquidity problems that it was facing, sources added. The largest oil marketing company’s receivables stood at mammoth Rs179.47 billion mark on Wednesday.
The petroleum ministry has already requested fellow ministries of Water and Power and Finance to release Rs60 billion to bail out PSO from its financial woes. The petroleum ministry had last week warned that the country would be facing a severe oil crisis if cash was not arranged but no major amount has been released so far.
Parco’s spokesperson Shah Muhammad Saad denied to The Express Tribune that fuel supplies have been suspended to PSO.
However, he accepted that there were some issues with PSO due to non-payment of dues. He said that Parco was supplying fuel worth Rs5 to Rs6 billion per month to PSO since July to November 2011.
We have supplied fuel worth Rs 3.5 billion to PSO during the current month and total monthly bill of fuel supply would touch over Rs5 billion mark, he said adding that we have already made arrangement delivery and payment with PSO.
PSO’s total receivables stand at Rs179.5 billion while total payables have accumulated to Rs155.4 billion as on November 23, 2011,. Around 23% or Rs35.62 billion is the amount from the total payables that PSO has to pay Parco.
Published in The Express Tribune, November 24th, 2011.
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Parco with majority state equity, and PSO with equity. I think the case should be handled by the Central Bank/State Bank of Pakistan and payment be transfered to PARCO from PSO by State Bank for and on behalf of PSO, to honor the commitment. This may help us with IMF, and rating agencies as S&P .