With cash crunch, PSO’s bank borrowings reach Rs130b

Company is compelled to take loans as clients delay payments for fuel supply

ISLAMABAD: As Pakistan’s political scene continues to remain murky over the Panama Papers case, the government seems to be paying little attention to the crippling circular debt that has long plagued the energy chain.

Among energy companies, Pakistan State Oil (PSO) - the state-owned oil marketing giant - is compelled to borrow from banks in an effort to run its operations as its clients - power producers, Pakistan International Airlines (PIA) and others - have defaulted on payments for fuel supply.



According to sources, PSO’s borrowings from banks have mounted to Rs130.5 billion in the wake of the cash crunch.

They said the Ministry of Petroleum and Natural Resources had written letters to the Prime Minister’s Office and the Civil Aviation Authority (CAA), seeking their support for bailing out PSO.

The oil marketing company’s receivables from different customers have touched Rs288 billion. Sources said PSO got Rs17 billion several days ago, but after that no payments were released. Though the CAA secretary had committed that PIA would pay its current dues to PSO, the commitment had not been fulfilled so far.

“The petroleum secretary wrote a letter to the CAA secretary last week, asking him to clear Rs15 billion worth of outstanding bills of PIA for fuel supply, but there was no response,” an official said, adding PSO was still continuing to supply fuel to the national flag carrier. PSO officials have also repeatedly contacted PIA’s chief financial officer to discuss and resolve the payment issue, but their efforts could not meet with success.

“This is a critical situation where PSO’s receivables are rising and it is close to exhausting its bank credit limit,” the official said.



Power producers were major defaulters of PSO. They have to pay Rs252.8 billion on account of fuel supply for power generation. Among these, Water and Power Development Authority (Wapda) has to pay Rs152 billion, Hub Power Company owes Rs64.1 billion and Kot Addu Power Company has to pay Rs30.5 billion.

PIA has to settle Rs15.6 billion in outstanding bills including Rs800 million in late payment surcharge.

Sui Northern Gas Pipelines Limited (SNGPL) also owes PSO for the supply of liquefied natural gas (LNG).

PSO imports LNG from Qatar and delivers it to SNGPL, which provides the imported gas to power producers, fertiliser plants, compressed natural gas (CNG) filling stations and industrial consumers. SNGPL has to pay Rs15.6 billion to PSO.

According to officials, outstanding bills of power producers and PIA including LNG supply have swelled by Rs48 billion and Rs5.7 billion respectively over the past 15 months.

Other than normal allocation, PSO received Rs20 billion on February 17, 2017 and Rs17 billion on June 22 from the Ministry of Finance, which tried to ease the financial constraints.

Published in The Express Tribune, July 20^th, 2017.

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