The Ministry of Water and Power, in an attempt to avert the fuel crisis, has pressed the Ministry of Finance to immediately release Rs45 billion for Pakistan State Oil (PSO), the oil marketing giant, which is facing the prospect of default on payments to international oil suppliers.
The power ministry made the demand following PSO’s warning to the government on Tuesday that it had to make some payments to the international fuel suppliers by Friday and any default might affect future supplies, said a senior official of the water and power ministry.
“However, no money has been provided so far for retiring letters of credit for oil imports,” the official said and pointed out that the finance ministry had to release the amount on account of subsidy for power consumers.
According to him, the power subsidy of Rs45 billion has been pending since the last financial year. “We are hoping to receive Rs5 to Rs7 billion, but it will not be sufficient to run the energy chain.”
Sources told The Express Tribune that the petroleum and power ministries took up the PSO issue on Wednesday during a meeting of the energy committee, chaired by the prime minister. The petroleum ministry officials told the meeting that PSO was on the verge of collapse due to lack of funds as power companies were not making timely payments to the oil supplier.
Receivables of PSO, mainly from the power companies, have reached an all-time high, standing at Rs237 billion while the company has to pay Rs179 billion to local and international fuel suppliers.
A petroleum ministry official cautioned that if PSO defaulted on international payments on Friday, it would not be able to continue uninterrupted oil supply to power plants, worsening power crisis in the country.
At present, PSO is purchasing furnace oil from Pak Arab Refinery Company (Parco).
“PSO needs immediate release of Rs23.5 billion to retire letters of credit on Friday to ensure supply of 28,000 tons of oil per day to the power sector as directed by Prime Minister Raja Pervez Ashraf,” the official said, quoting a letter sent by PSO to the finance and water and power ministries as well as the energy committee.
PSO has also requested Rs15.5 billion for first 10 days of next month to ensure smooth supply of oil to the power companies.
Published in The Express Tribune, July 27th, 2012.