Inter-corporate debt problem bites Pakistan

The inter-co­rporate debt problem has once again started biting state-run companies of the petroleum and power sectors.

The inter-corporate debt problem has once again started biting state-run companies of the petroleum and power sectors. Last week, the Pakistan State Oil asked the Pakistan Electric Power Company and the Pakistan International Airlines to clear their dues, as their failure has hampered a smooth flow of operations at the largest oil marketing company of the country.

Adding to the voice of those demanding payment of outstanding dues, the Sui Southern Gas Company came down hard on the KESC, pressing it to release the billions stuck with the cash-strapped power supplier.

Total receivables of the PSO are Rs130 billion, of which it has to pay Rs80 billion to refineries and Rs36 billion to international oil suppliers, a PSO official told The Express Tribune. To cope with the cash flow problem, the company has drawn Rs38 billion out of the overdraft facility of Rs40 billion.

The official said the KESC owes around Rs1.5 billion to the PSO, but it is within its credit limit of Rs1.7 billion.

“No payment has been received since June when the government released Rs36 billion out of the promised Rs41 billion,” the official said, adding this money was used to clear some of the debts of the company.

Critical situation

About oil inventory, the official said “stock situation is critical. We have three days of petrol stocks and 11 days of diesel stocks.” If the issue was not tackled, imports of petroleum products may get delayed, leading to shortage in the country. However, the official expressed hope things will improve in coming days.

At a summit in Islamabad in May this year, the government, provinces and stakeholders of the energy sector had agreed to take various measures to improve electricity supply and deal with the Rs116 billion inter-corporate debt crisis. The World Bank too has asked the government to stop the piling up of debt and bring it down and it is one of the major conditions of its loan programme.

Earlier in September 2009, the government issued Rs85 billion worth of term finance certificates to banks and other financial institutions in a bid to clear the circular debt.

SSGC may get Rs8b soon

Last week, the Sui Southern Gas Company said the Karachi Electric Supply Company owes Rs21 billion to the gas supplier. However, the KESC paid Rs500 million and assured that it will release more money next week.

An SSGC official said there are reports that Chief Secretary Fazlur Rehman has announced that the Karachi Water and Sewerage Board will soon pay its dues of Rs8 billion to the KESC and these will be transferred directly to the SSGC.

He said the SSGC supplies around 208 million cubic feet of gas per day to the KESC against the demand of 275 million cubic feet per day.

However, the KESC on its part asserted that it has to recover Rs60 billion from different consumers, major parties among them were government departments and Karachi Water and Sewerage Board. “That amount included the subsidy as well,” a KESC official said.

“If our dues are cleared, we will pay our outstanding bills as well,” he said. About SSGC, he said the KESC has paid Rs23 billion to the gas supplier in one year.

Regarding the sanction of Rs305 million as subsidy to the KESC by the finance ministry a few days ago, he said release of small amounts will not solve the problem. “We need planning to resolve the inter-corporate debt issue.”

Published in The Express Tribune, July 19^th, 2010.