PSO demands budget allocation for gas, oil imports

Plea comes in backdrop of billions stuck in energy supply chain

ISLAMABAD: State-owned oil marketing major Pakistan State Oil (PSO) has pleaded to the government to earmark adequate funds in the upcoming budget for timely payments for gas and furnace oil imports.

The request comes in the backdrop of longstanding circular debt that has plagued the energy chain for the past many years.

In a letter sent to the ministries concerned as well as to Prime Minister Nawaz Sharif, PSO authorities insisted that adequate matching subsidy allocated in next year’s budget would ensure continued support to the power producers in terms of furnace oil and re-gasified liquefied natural gas (RLNG) supply.

The company further said the budget allocation for the power sector for current fiscal year 2016-17 should be supplemented urgently or at least Rs122.9 billion should be arranged for PSO immediately.

It called for finalising measures as early as possible to reduce the financial burden of PSO, which was facing arrears of Rs186.9 billion including current and past dues, and demanded implementation of a plan to settle the principal circular debt.

PSO asked the government to clear the price differential claims amounting to Rs9.6 billion before June 2017.



It cautioned that the supply of petroleum products in the country was at risk and keeping in view the summer and Ramazan requirements, the collapse of the system needed to be averted.

PSO has curtailed purchases from domestic refineries, which will impact the supply of petroleum products across the country.

Receivables of the company from different clients have swelled to an all-time high of Rs281 billion during the tenure of the present government. It has issued an SOS (Save Our Soul) call to the ministries concerned.

Power consumers were already facing prolonged load-shedding as shortfall jumped to over 4,000 megawatts, resulting in 8 to 15 hours of outages across the country.

In the letter, PSO said furnace oil cargoes had been lined up for the independent power producers (IPPs), but they were reluctant to lift the required volume. Owing to this, PSO has been unable to place fuel orders for upcoming months.

“This letter should be considered as an SOS call as default is looming and it will impact supply chain in the country,” PSO said in the letter sent to finance, petroleum and power ministries.

PSO has received significantly lower demand for furnace oil at 12,500 tons compared to the demand for 16,500 tons on December 29, 2016.

Since the company had planned imports according to the demand received in December, four cargoes of High Sulphur Fuel Oil (HSFO) comprising 260,000 tons were lined up while one cargo of Light Sulphur Fuel Oil (LSFO) carrying 55,000 tons was awaiting discharge.

“IPPs be directed to increase their inventory as per requirement and it is to be noted … stocks will not be reduced significantly from the current level by the end of April due to ordered volumes,” PSO said.

As a result, the company has not ordered cargoes for April and may also not place orders for May as well.

PSO expressed concern that the Ministry of Water and Power was not paying in line with the agreed seven-day credit arrangement. Consequently, the net outstanding amount against the credit arrangement from February 7 to date has gone up to Rs40.4 billion.

Published in The Express Tribune, April 16^th, 2017.

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