Power producers: Fuel supply may come to a halt on cash constraints

PSO in urgent need of Rs35 billion to retire letters of credit.

Zafar Bhutta August 24, 2011


Fuel supply for power producers may come to a halt, as public-sector oil and gas companies have expressed their inability to continue operations due to circular debt, sources said on Tuesday.

Their receivables against different clients exceed Rs371 billion, which is more than what DISCOs are to receive from the provinces and private-sector consumers.

The sources told The Express Tribune that the cash-strapped Pakistan State Oil (PSO) was about to default, as it required Rs35 billion immediately to retire letters of credit to import oil.

PSO depends on the import of furnace oil and jet fuel due to low production by oil refineries, which are also faced with the issue of circular debt.

DISCOs are to receive Rs210 billion from different consumers. Out of the total receivables, the provinces owe DISCOs Rs82.7 billion.

According to a document on circular debt available with The Express Tribune, PSO’s receivables as of August 15 had exceeded Rs147.078 billion. Similarly, the receivables of Pakistan Petroleum Limited (PPL) were Rs40.861 billion, Sui Southern Gas Company Limited (SSGCL) were Rs42.5 billion, Government Holdings Private Limited (GHPL) were Rs10.67 billion, Sui Northern Gas Pipeline limited (SNGPL) were Rs12.42 billion and Mari Gas Company Limited (MGCL) were Rs7.767 billion.

The country’s largest oil and gas exploration company, Oil and Gas Development Company Limited (OGDCL), is to receive Rs 110 billion from oil refineries and gas companies.

The energy committee is currently working on different proposals to find out a permanent solution to the issue of circular debt. The committee has held several meetings, but it has not reached any solution yet.

In a recent meeting chaired by Prime Minister Syed Yousuf Raza Gilani, it was decided to inject Rs25 billion into oil, gas and power sector to end the financial woes of PSO.

The sources also said that PSO’s payables were piling up and it was becoming difficult for the public-sector company to retire letters of credit to import oil. As of August 23, PSO is to pay Rs159.042 billion to fuel suppliers. PSO owes Rs25.86 billion to Pak-Arab Refinery Limited (Parco), Rs7.8 billion to Pakistan Refinery Limited (PRL), Rs9.47 billion to National Refinery Limited (NRL), Rs14.82 billion to Attock Refinery Limited (ARL) and Rs3.79 billion to Bosicor Oil Pakistan Limited.

Out of its total payables, PSO owes Rs96.82 billion to international fuel suppliers, including Kuwait Petroleum Corporation (KPC).

Published in The Express Tribune, August 24th,  2011.


muhammad zahid siddiqui` | 11 years ago | Reply There is a very interesting point to note. Unlike all big public sector organizations, which now have become public limited companies, WAPDA, which is Pakistan's largest organization, is still an Authority. All financial issues of this Authority are directly being looked after by Ministry of Finance. All ordinary, innocent customers deposit their bills timely, and hundreds of billions of rupees collected are siphoned off by the Ministry of Finance for usage anywhere else. The high ups of WAPDA have been saying in different public appearances that if they were allowed to use the money independently, collected by exorbitant billing, the menace of circular debt can be eliminated. Time and again, we have been hearing through the local media that WAPDA is suffering due to power theft, line losses, etc. It is pertinent to mention that chances of power theft have now been minimized, as WAPDA recovers charges from the distribution companies as per the units provided to them. Distribution companies in turn recover the charges from the poor customers by hook or by crook. The deficiency in their management is evident from the fact that a large number of customers receive inflated bills each monthy to make for the electricity units sold by them cheaply to make quick bucks.
R S JOHAR | 11 years ago | Reply

@pakarmy: A good comment. The fact of the matter is that adding more armaments to one's kitty is a meaningless exercise until it is backed up with a strong economy which India possesses as same is essential to sustain a long duration war. As such spending billions of dollars for adding more number of nukes is a foolhardy exercise which Pakistan would never be able to use since it would not only evoke a massive response from India but also from the Western countries as well. So brother, thank your military for the failing economy, rise in prices and also continues violence in the country due to support of their assets.

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