ISLAMABAD: As receivables of the cash-strapped Pakistan State Oil (PSO) cross the Rs200 billion mark, the Ministry of Petroleum and Natural Resources has stopped PSO from supplying imported furnace oil to power companies on credit and has asked the Ministry of Water and Power to arrange funds and buy oil on cash.
“If power companies do not release funds for furnace oil, the water and power ministry should directly import furnace oil or buy from local refineries for running the power plants,” a petroleum ministry official said in a meeting held at the ministry on Thursday. Petroleum Minister Dr Asim Hussain presided over the meeting.
PSO, the largest oil marketing company of the country, imports and supplies furnace oil to power companies on deferred payment.
“Now, PSO will not open letters of credit (LC) for furnace oil import unless power companies pay cash,” the official said. To sort out the matter, the Ministry of Finance will hold a meeting on Friday.
According to the official, the supply of high-speed diesel and other petroleum products is being hurt because of increasing dues to be paid by power companies.
Because of the financial crunch, PSO has also not been able to pay the refineries, which in turn are facing difficulties in importing crude oil and making payments to state-owned oil and gas explorer Oil and Gas Development Company (OGDC).
Oil refineries and gas distribution companies are to pay over Rs131 billion to OGDC, which has hampered exploration activity.
Officials of the water and power ministry told the meeting that the National Electric Power Regulatory Authority (Nepra) had allowed power distribution companies a tariff increase on account of fuel price adjustment.
Earlier, the petroleum ministry had suggested that PSO would open LCs for purchasing petroleum products from oil refineries and the Water and Power Development Authority (Wapda) and other power utilities will also have to open LC to get oil from PSO. In this way, oil supply on credit would come to an end. However, the plan was not implemented.
On April 26, PSO’s receivables stood at Rs200.286 billion including Rs54.58 billion from Wapda, Rs97.15 billion from Hubco and Rs20.28 billion from Kapco. Its payables to refineries and international furnace oil suppliers totalled Rs178.74 billion.
Published in The Express Tribune, April 27th, 2012.