The government on Friday approved a grant of Rs25 billion to partially ease the financial woes of Pakistan State Oil (PSO) amid the opposition’s warning that it would reverse all the decisions taken after the submission of no-confidence motion once it formed a new government.
The Economic Coordination Committee (ECC), which continued to hold its meetings while ignoring the current political turmoil and the apparent lack of government majority in the National Assembly, approved another Rs25 billion in supplementary grant. It has brought the total cost of decisions taken by the ECC since March 7, 2022 to roughly Rs907 billion.
Opposition parties have submitted a no-confidence motion against Prime Minister Imran Khan and voting is likely to take place on Sunday. Ahsan Iqbal, former planning minister and Secretary General of the Pakistan Muslim League-Nawaz (PMLN), tweeted on Friday that “any appointment, seniorlevel transfer and posting or allocation of funds, approval of schemes done after moving of no-confidence will be revisited and bureaucrats facilitating such illegal and unethical measures will be held accountable”.
Interestingly, the Ministry of Planning has also scheduled a meeting of the Central Development Working Party on Monday – a day after the voting on the no-confidence motion – to approve new development schemes. The ECC approved Rs25 billion in supplementary grant against the urgent request of Rs50 billion. The request was made to ensure smooth supplies of LNG and oil, as PSO’s receivables had jumped to Rs456 billion as of early March.
PSO supplied re-gasified liquefied natural gas (RLNG) to Sui Northern Gas Pipelines Limited (SNGPL) from July 2021 to February 2022 worth Rs380 billion and received only Rs266 billion and is facing a shortfall of Rs114 billion, according to the Petroleum Division. It added that the instant liquidity requirement of PSO was Rs50 billion. PSO may be required to import additional cargoes that will have a direct impact on its financial and funding capacity, which will be highly compromised due to a steep rise in cargo value, which may increase from Rs8 billion per cargo in the last quarter to Rs14 billion, according to the Petroleum Division.
The ECC was informed that the selling of petroleum products at the subsidised price in the domestic market would also have an adverse impact on the liquidity requirement of PSO from March 2022 to June 2022. Out of almost 4,000 mmcfd of gas injected into the economy, 2,800 mmcfd is domestic gas whereas the remaining is imported LNG. PSO has massive commercial exposure.
Delayed payments from the power sector, subsidised RLNG supplies to the zero-rated sector and RLNG diversion to the domestic sector at substantially low prices are the major contributing factors to the circular debt and they are making PSO financially vulnerable. An analysis of pricing trend of the imported LNG reveals that an average cargo has been priced at Rs11 billion instead of Rs7 billion in the last quarter due to the volatility driven by abnormal supply-demand conditions coupled with the geopolitical situation.
The ECC deferred decision on approving another Rs26.6 billion in subsidy for providing electricity and gas at subsidised rates to the exporters, mainly the textile sector. The Petroleum Division had estimated subsidy requirement of Rs26.6 billion for the period November 2021 to June 2022. The division had sought Rs9.5 billion for clearing the outstanding claims for gas and RLNG supply to the export sector and Rs17 billion to cover the projected subsidy claims from March 2022 to June 2022.
The ECC also deferred decision on a summary moved by the energy ministry to seek subsidy for the oil marketing companies. But it approved Rs828 million worth of supplementary grant in favour of the Ministry of Information Technology and Telecommunication for the Special Communication Organisation.
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