Mounting dues: Spectre of circular debt haunts fuel, power supply

ISLAMABAD:

The spectre of circular debt is back, threatening disruption of fuel and power supply across the country and prompting the petroleum ministry to request the finance and water and power ministries to immediately arrange Rs60 billion to bail out the anemic Pakistan State Oil (PSO).

Cash-strapped PSO is close to defaulting on payments to international fuel suppliers due to non-payment of dues by the power sector. PSO owes Rs99.58 billion to international fuel suppliers as well as in payments to retire letter of credits to import oil from the Kuwait Petroleum Corporation.

PSO’s payables to fuel suppliers crossed Rs150 billion on Tuesday while its receivables from various clients, including the power sector, reached Rs136.4 billion.

Secretary Petroleum Ijaz Chaudhry confirmed that he has sent a letter to the finance and water and power ministries to arrange Rs60 billion for PSO.

Sources say non-payment of dues could lead to international suppliers halting fuel supplies to PSO. Oil refineries have stopped fuel supplies to PSO in the past but resumed them after the intervention of the petroleum ministry.

Meanwhile, sources also added that due to chronic circular debt, the country’s fuel stock has already plummeted and could fall further, pitching the country into darkness and bringing it to a grinding halt.

Published in The Express Tribune, July 6^th, 2011.