ISLAMABAD: The Finance Division is likely to release Rs35 billion in a bid to cushion squeezed finances of oil marketing major Pakistan State Oil (PSO) apparently in reaction to the Ministry of Energy’s warning of an imminent default in the country’s oil and gas supply chain.
“The Finance Division is processing a proposal for the release of Rs35 billion to PSO, but it is not a sustainable solution,” an official said.
“PSO requires Rs60 billion immediately to ensure smooth oil supplies. The Ministry of Energy (Petroleum Division) wants a permanent solution to the circular debt bubble.”
PSO is also importing 500 million cubic feet of liquefied natural gas per day from Qatar and this could also be disrupted in case its cash flow does not improve. Its receivables have soared to Rs316 billion for oil supplies.
Power producers were a major defaulter as billions of rupees have been stuck in the supply chain in the wake of a ban on the consumption of furnace oil in power plants.
PSO has been a key supplier of furnace oil to the power plants, which has helped overcome electricity shortages.
To press PSO’s case, the Petroleum Division had sought intervention of the Cabinet Committee on Energy in its last meeting. It cautioned the committee that outstanding bills against the power producers had adversely impacted the financial position of PSO and any further delay in payments could spark default.
It suggested that the Power Division, Aviation Division and Pakistan International Airlines (PIA) may be directed for early clearance of their dues, which would improve PSO’s liquidity and stave off any breakdown of the supply chain.
However, according to officials, the cabinet body failed to come up with a permanent solution to restrict the growing PSO receivables, which were at an all-time high in the company’s history.
PSO is the only public sector oil marketing company in the country and is the largest fuel supplier to the power producers. In an effort to support uninterrupted power generation and minimise load-shedding, PSO says it ensured a smooth fuel supply without receiving routine payments. The Petroleum Division has been making efforts to resolve the issue of delay in payments and meet all fuel requirements.
According to a senior government official, several meetings had been held with the Power Division and the Ministry of Finance, however, apart from a temporary relief, no sustainable solution has emerged so far.
PSO’s receivables from the power producers had swelled to Rs195.5 billion including Rs64.40 billion accumulated after the inception of seven-day credit arrangement.
Published in The Express Tribune, December 16th, 2017.