Cash constraints: PSO once again pleads for release of funds

Company delays import of two oil cargoes.

ISLAMABAD:

Compelled by the financial crunch, Pakistan State Oil (PSO) is once again pressing the government to release funds to help the company purchase furnace oil on time and meet demand of power companies.

According to sources, PSO in a recent letter to the Ministries of Petroleum, Finance and Water and Power requested that they should arrange Rs23 billion, which would enable the company to retire letters of credit for import of oil.

“We have already delayed import of two oil cargoes due to shortage of funds and if the government does not provide money, imports can come to a halt, causing shortage of furnace oil for power generation,” a PSO official said.

The Ministries of Petroleum, Finance and Water and Power had been asked to arrange funds to ensure oil imports to meet the country’s requirements, he said.

However, the Ministry of Water and Power has expressed its helplessness, saying it has not been able to help PSO get its dues due to reluctance of the finance ministry to clear power tariff differential subsidy worth billions of rupees.

The expected shortage of furnace oil may worsen the power crisis and may jeopardise government’s plan to provide uninterrupted power supply during Eid days.

Peak demand for electricity stood at 18,055 megawatts against generation of 14,053 megawatts, showing a shortfall of 4,002 megawatts.

Sources told The Express Tribune that in a recent meeting, officials of the petroleum ministry told Prime Minister Raja Pervez Ashraf that the country could face shortage of petrol and diesel along with furnace oil if money was not released to reduce the circular debt.

The premier was warned that PSO was near financial collapse due to delay in payment of dues and its swelling receivables.

Power companies receive oil from PSO worth over Rs40 billion every month. PSO got Rs22.25 billion from August 1 to 17, including Rs10 billion which the finance ministry released on Friday.

Government officials are of the view that it is another ad hoc solution to continue oil supplies rather than resolving the circular debt issue altogether, which was caused by power sector’s inefficiencies.

On August 16, PSO’s receivables stood at Rs243 billion mainly from the power sector. It imports furnace oil on two-month credit and the Economic Coordination Committee (ECC) has now enhanced the credit limit to four months.

Published in The Express Tribune, August 19^th, 2012.