ISLAMABAD: As the government has banned the use of furnace oil in power plants to clear the way for consumption of relatively cheaper liquefied natural gas (LNG), the Petroleum Division has sought intervention of a cabinet committee to clear bills of Pakistan State Oil (PSO) in order to avoid disruption to oil and gas supplies.
PSO had been supplying furnace oil to feed power plants, but the government abruptly abandoned its use in electricity production. As a result, PSO is now facing a financial crunch as power plants are unable to clear dues of billions of rupees.
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According to a senior government official, the Ministry of Energy (Petroleum Division) has approached the Cabinet Committee on Energy, pointing out that outstanding receivables of PSO from the power producers had adversely impacted financial position of the state-run oil marketing giant.
Any further delay in payments could result in default, eventually leading to disruption in the entire supply chain, it cautioned.
The Petroleum Division suggested that the cabinet committee should also direct the Power Division, Aviation Division and Pakistan International Airlines (PIA) to clear their dues early, which would improve PSO’s liquidity and stave off any breakdown of the supply chain.
In order to facilitate uninterrupted power generation and minimise load-shedding, PSO says it has ensured smooth fuel supply to the power producers on credit. However, now the oil supplier is facing a liquidity crisis.
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“The Petroleum Division has held several meetings with the Power Division and Ministry of Finance in an attempt to address the issue, but apart from a temporary relief, no sustainable solution has been found yet,” the government official said.
As of November 29, 2017, total receivables of PSO from the power producers swelled to Rs195.5 billion including Rs64.40 billion accumulated after the start of a seven-day credit arrangement.
PSO says it is continuously meeting PIA’s jet fuel demand despite uncompetitive margins. However, PIA is not making payments and as a result the receivables have jumped to Rs13.8 billion.
In addition to this, Sui Northern Gas Pipelines owes Rs13.4 billion on account of LNG supplies.
Published in The Express Tribune, December 12th, 2017.
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