Cash constraints: PSO asks KESC to pay for furnace oil supplies

Power utility says company is well within credit limit.

KARACHI:

Pakistan State Oil (PSO) has said that it is experiencing a liquidity crisis because Karachi Electric Supply Company (KESC) has not made good on committed payments for fuel supplies and is considering curtailing oil sales to the power utility.

In an announcement on Tuesday, PSO said it is making regular supplies to KESC and has provided around 47,000 tons of furnace oil in July alone.

As per fuel supply agreement with KESC, PSO said the monthly credit limit is equal to the prevailing value of 30,000 tons of furnace oil. However, during April, due to reduction in gas supplies from Sui Southern Gas Company, KESC’s credit line was enhanced from 30,000 to 50,000 tons.

In July, PSO said it extended KESC’s credit line to 75,000 tons on the instructions of the Ministry of Petroleum, with the commitment to pay Rs1.7 billion on July 15. However, KESC regretted to honour its commitment on July 15.

PSO said its total receivables against KESC stand at Rs13.2 billion, of which KESC has to pay Rs9.3 billion for furnace oil supplies since April and the government has to pay the remaining Rs3.9 billion on account of price differential for subsidised supplies in 2010.

A KESC spokesman said the company has credit limit for 75,000 tons of furnace oil and “we are well within the limit.” He said KESC has an agreed payment plan with PSO and the outstanding Rs1.7 billion is part of the plan.

Published in The Express Tribune, July 27^th,  2011.