Pakistan State Oil’s (PSO) bank accounts were unfrozen by the Federal Board of Revenue (FBR) on Saturday in light of cash constraints faced by the country’s largest oil marketing company.
FBR had frozen PSO’s bank accounts a couple of days ago as it failed to meet tax obligations. The company’s receivables have crossed Rs173.5 billion.
“As the largest energy company in the country, PSO has always been prompt in making tax payments,” the company said in a statement. “However, the company’s astounding receivables due to the increasing circular debt have constrained it from meeting tax obligations recently.”
PSO spokesperson Mariam Shah told The Express Tribune that the company’s financial position was shrinking as receivables were increasing.
Two days ago, PSO received Rs7 billion from the Water and Power Development Authority (Wapda), said the spokesperson. However, this amount was not enough to mitigate the problem of circular debt, the spokesperson added.
“Tax authorities were informed that their decision to freeze accounts will lead to mistrust among international suppliers who will refrain from doing business with Pakistan,” she said.
PSO has a responsibility to make payments to its international suppliers in order to ensure uninterrupted fuel supply to the nation amid its ballooning receivables.
Reliance on imported fuel increases
PSO says that local refineries have stopped supplying any product to the company as their refining capacity has been affected by the circular debt. PSO owes more than Rs100 billion to refineries.
Reduction in production of refineries has increased the reliance on expensive imported petroleum products.
PSO has urged the energy sector to make immediate payments so the company may return to a stable position and fulfill its international commitments along with meeting its tax obligations.
The government is replacing heads of eight major state-run organisations in the oil and gas sector after alleged failure to deliver in the face of the energy crisis. Prime Minister Syed Yousaf Raza Gilani has directed the Ministry of Petroleum and Natural Resources to completely revamp the sector with an aim to enhance production and resolve the debt issue.
Published in The Express Tribune, May 1st, 2011.