Gilani to intervene in energy crisis

PSO halts supply of fuel to power companies again.

KARACHI: Prime Minister Yousaf Raza Gilani is set to meet with Pakistan State Oil (PSO) executives on Friday (today) to discuss measures to resolve the energy sector’s circular debt crisis.

The prime minister’s moves come on the heels of frantic efforts by the ministry of water and power to avert yet another escalation of the ongoing energy crisis in the country.

Earlier on Thursday, PSO had discontinued supplies of furnace oil to the country’s largest power generation companies including the Pakistan Electric Power Company (Pepco), the Hub Power Company (Hubco) and Kot Addu Power Company (Kapco) on grounds that these companies’ outstanding dues to PSO had reached a critical level.

By Thursday evening, however, the power ministry’s efforts resulted in a resumption of fuel supplies to Pepco, the government-owned power generation company.

PSO has been supplying about 23,000 tons of furnace oil to the power companies and an interruption would severely hamper their ability to provide electricity to the national grid. But PSO insists that the outstanding amounts have gone beyond the company’s ability to continue financing indefinitely.

“Power generation companies now owe PSO over Rs158.65 billion,” said the company spokesperson adding that the company has not received any payments from them since January 7.

This is not the first time that supplies of furnace oil to energy sector have been suspended by PSO. The company has often threatened to cut off oil supply to power companies. However the last time this threat was actually carried out was in September 2009, when power companies remained without oil shipments for four days.

Spokespersons for both Hubco and Kapco remained unavailable for comment.

PSO says that it owes Rs139 billion to its supplies and that an inability to meet these obligations could negatively impact the country’s ability to receive fuel shipments in the future.

The crisis of payments originated in the 2007 decision by the government to subsidise local energy prices despite sharp rises in international oil prices. However, the government was unable to pay the subsidies it promised, resulting in massive unpaid bills at every link of the energy chain.

The debts have led to power companies and refineries functioning at well below their optimal capacity, resulting in rolling blackouts throughout the country that last for several hours every day.

Published in The Express Tribune, February 18^th, 2011.