The Ministry of Finance has turned down Pakistan State Oil’s (PSO) request for release of billions of rupees, sought by the oil marketing firm in a bid to stave off default on payments to international fuel suppliers.
“We have already paid Rs40 billion to power companies in advance, though the water and power ministry submitted Rs20 billion worth of bills,” a source quoted the finance ministry as saying.
“Unless the water and power ministry settles the subsidy amount paid in advance, the finance ministry cannot give more money.”
According to officials, receivables of PSO, which could face default in the next three to four days, have touched Rs210 billion, of which power companies owe Rs190 billion.
On the other hand, PSO has to pay Rs98 billion to fuel suppliers including Rs15 billion to domestic refineries.
Company officials have sent several requests for rescue to the water and power and finance ministries, but to no avail.
A couple of months ago, PSO missed the deadline for retiring five letters of credit (LCs) to clear bills of international fuel suppliers as power companies failed to pay for oil purchases. Once again, the oil marketing giant is on the brink of financial collapse due to poor management of power companies.
Global suppliers are hesitant to ship more oil consignments unless advance payments are promised by PSO.
“PSO officials have informed relevant ministries and the prime minister about the liquidity crunch and the receivables hitting alarming levels,” said an official.
According to officials, the Pakistan Electric Power Company (Pepco) is recovering Rs4 billion per day from power consumers, but is setting aside only Rs200 to Rs250 million for paying PSO bills.
In a meeting held on June 21 under the chairmanship of Finance Minister Ishaq Dar that discussed power outages in Ramazan, the Ministry of Petroleum and Natural Resources said PSO’s credit lines had been choked and it did not receive payments regularly and timely from power companies.
“The petroleum ministry has been doing its best to supply oil to the power sector and continues to do so, but some issues need to be resolved,” a ministry official said. “Even in the past, timely payments were promised to PSO for imports, but the promise was never kept and the company faced serious financial and supply issues,” the official added.
The Ministry of Water and Power has been asked to chalk out a mechanism that can ensure smooth payments for oil supplies by electricity producers but nothing has been done so far.
Published in The Express Tribune, September 17th, 2014.
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Making the dharna an scapegoat for your poor governance will fly no more. Shape up or ship out.