PSO faces spectre of default on international payments

Seeks release of funds before June 29 as receivables swell to Rs212b.

ISLAMABAD: The cash-strapped Pakistan State Oil (PSO), whose receivables from clients have swelled to over Rs200 billion, has cautioned the government that it will default on payments to international oil suppliers if money is not released by June 29.

This will not only lead to oil shortage for power plants, but will also damage the country’s credibility in the international market, it said.

“We have informed the petroleum and finance ministries that PSO’s receivables, mainly from power companies, have exceeded Rs212 billion, making it impossible for the company to retire letters of credit (LCs) opened for import of furnace oil for power plants,” a PSO source said, adding the situation would start worsening after June 29 if funds were not released.

PSO has to pay Rs182.4 billion to local and international oil suppliers, of which Rs94 billion will be given to international fuel suppliers.

According to an official of the petroleum ministry, Prime Minister Raja Pervaiz Ashraf has asked Finance Minister Dr Abdul Hafeez Shaikh to provide Rs10 billion to PSO, which would enable the company to arrange fuel for power production to overcome excessive load-shedding. “We are hoping for the release of Rs10 billion for PSO in a couple of days,” the official said.

In the first meeting on energy last week since his election, Prime Minister Ashraf directed the petroleum ministry to take steps for enhancing oil supply to power plants to 28,000 tons per day.

“We have increased oil supply to power companies. We are providing 5,600 tons of furnace oil per day to Kot Addu Power Company (Kapco), 7,200 tons per day to Hub Power Company (Hubco) and 8,600 tons per day to Wapda’s generation companies to help them enhance electricity production,” the ministry official said.

According to him, power companies cannot make timely payment to PSO because of poor recovery of bills from consumers. Power companies receive 81% of total billing, which causes a loss of Rs7 billion every month.

According to a statement issued by the Ministry of Water and Power on Tuesday, power production is improving and shortfall is reducing gradually. “Around 400 megawatts will be added to the system on Tuesday evening from Kapco,” it said.

After arrival of oil at other power stations from Karachi by Wednesday, 300MW more would be produced from four power plants, it said, adding additional oil supply had also been started to the Muzaffargarh power station (Genco-III). Fuel tankers would reach there on Thursday and power production would rise by 445MW on the same day, it said.

Published in The Express Tribune, June 27^th, 2012.