ISLAMABAD: As the state-run oil marketing company, Pakistan State Oil (PSO), persistently slips towards financial collapse due to all-time high receivables, the government is likely to release a minuscule amount for the circular debt.
According to officials familiar with the development, the Ministry of Finance has agreed to provide Rs45 billion for energy companies to ease the burden of circular debt. However, PSO, whose receivables have crossed Rs300 billion, is likely to receive only Rs10 billion for onward payment to fuel suppliers. The remaining amount will go to Independent Power Producers (IPPs).
Prime Minister Nawaz Sharif has held several meetings with the Cabinet Committee on Energy to resolve the power crisis. However, the issue still persists along with the circular debt, which is mounting with the passage of time. The debt has exceeded Rs400 billion once again.
PSO’s receivables from the power sector, Sui Northern Gas Pipelines Limited (SNGPL) and Pakistan International Airlines (PIA) have reached Rs300.8 billion because of delay in payment of dues mainly by power producers.
The power sector owes Rs257.3 billion, including Rs57 billion under a seven-day credit arrangement and Rs69 billion as late payment surcharge. Additionally, receivables from SNGPL and PIA are Rs18 billion and Rs16 billion respectively.
PSO is constantly engaged with relevant ministries for immediate release of funds under the seven-day credit arrangement and for furnace oil supplies during the summer months between June and September.
The company will need around Rs165 billion to cater to the demand from private IPPs in the summer.
Currently, PSO has around 110,000 tons in its storage, in addition to 350,000 tons in transit or with power plants. It also has 10 vessels in line to supply 650,000 tons during June.
In case, the government fails to release immediate funds, the state-run firm will not be able to place further import orders and will have to curb fuel supplies, which in turn will add to the power crisis and exacerbate load-shedding in the country. Immediate release of funds by the government will not only help PSO to sustain its business operations in the short run, but will also ensure availability of electricity during the summer.
Published in The Express Tribune, June 1st, 2017.