PSO receivables soar to Rs362b

Company faces circular debt issue due to inability of clients to pay bills timely

Zafar Bhutta August 29, 2021


Despite making heavy profits in the last financial year, Pakistan State Oil (PSO) continues to face the challenge of circular debt due to inability of clients to pay bills timely.

Recently, the company announced its highest-ever after-tax profit of Rs29.1 billion for financial year 2020-21. Even though it claims to have improved its balance sheet, PSO’s receivables from all the clients touched Rs362 billion.

PSO has recovered Rs25.8 billion from the power sector along with late payment surcharge income.


At present, PSO is to recover Rs362 billion from its clients. Earlier, the government had made a payment to independent power producers (IPPs) who made payment onwards to PSO.

Due to this, the outstanding had declined to Rs243 billion. However, they continue to rise and touched the Rs262 billion mark now.

The company management has reduced finance cost by Rs3.2 billion that had further complemented the profitability of the company. However, it is still facing a critical time due to all-time high receivables.

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PSO supplies oil to different clients and now a new phenomenon in the shape of circular debt has emerged on account of liquefied natural gas (LNG).

Of the total, PSO has to receive Rs185 billion from the power sector on account of oil supply for power generation.

Generation companies are major defaulters that have to pay Rs138 billion. Hubco owes Rs38 billion, whereas Kapco has to pay Rs8.4 billion.


PSO has also played a pivotal role in the LNG sector. The company entered into another agreement with Qatar Petroleum under G2G arrangement to supply an additional three million tons of LNG for a period of 10 years.

This contract shall add additional volumes to an already executed 15-year long-term sales purchase agreement (SPA), making PSO the largest supplier of LNG in the country with a supply base of 6.75 million tons per annum.

However, the company is facing circular debt issue in this sector. It is supplying LNG to the Sui Northern Gas Pipelines Limited (SNGPL) to distribute to the consumers.

SNGPL has to pay Rs139 billion to PSO on account of LNG supply. This is a new addition in the circular debt chain in the oil and gas sectors.

Pakistan International Airlines (PIA) is another big defaulter of PSO. PSO supplies jet fuel to the airline to continue its operations. However, it has not been able to pay dues to PSO on account of fuel supply.

PIA has to pay Rs21.5 billion to PSO. The state-run oil company is due to receive Rs9.2 billion from the government on account of price differential claims.


Despite multibillion rupees of PSO being stuck due to non-payment of dues by its clients, it has been making major payments to oil refineries in Pakistan.

PSO has to pay Rs23 billion to oil refineries. It owes Rs11 billion to Pak-Arab Refinery Company (Parco), Rs4.5 billion to Pakistan Refinery Limited (PRL), Rs2 billion to National Refinery Limited (NRL), Rs3.7 billion to Attock Refinery Limited (ARL), Rs276 million to Byco and Rs1 billion Enar.

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PSO is also the largest importer of oil. It has an agreement with Kuwait Petroleum. It has to pay the company Rs129 billion on account of LC payments for oil and LNG.

The financial results have demonstrated PSO’s agility and strength across its diverse portfolio despite the challenging economic scenario and recurrent waves of the pandemic.

PSO growth

PSO is leading the market by a large margin, delivering a phenomenal performance over and above the industry average.

Despite swelling outstanding, the company has exhibited an outstanding growth of 21.9% in liquid fuels over last year with volumes reaching 9.2 million tons, attaining a market share of 46.3% in FY21 compared to 44.3% in FY20.

PSO also achieved its highest-ever volume of 7.6 million tons in the white oil segment despite the shrinking jet fuel and kerosene oil industry, with a market share of 45.2% in FY21 compared to 44% in FY20.

PSO set an all-time high record in motor gasoline (MoGas), achieving volumes of 3.5 million tons, an increase of 21.2% from FY20, translating into market share of 41.3% compared to 38.7% last year.

The company made a strong closing in Hi-Cetane Diesel as well, achieving a volumetric growth of 21.1% vs industry growth of 17.5%, translating into volumes of 3.7 million tons in FY21.

Published in The Express Tribune, August 29th, 2021.

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