Circular debt: Probe begins against state-owned oil, gas firms

Petroleum ministry investigates companies suspected to be in breach of fuel supply contract to power sector.

Zafar Bhutta December 16, 2012


Petroleum ministry has begun probe of alleged involvements of state-owned oil and gas firms in supplying fuel to the power sector and oil refineries in breach of agreements after their receivables exceeded Rs447 billion leading to their financial collapse.

Sources told The Express Tribune that the ministry had questioned public oil and gas firms whether they were providing fuel to the power sector in line with supply agreements or not.

The officials from the Ministry of Petroleum and Natural Resources said that all oil and gas firms were supplying fuel to the power sector along with other clients in violation of supply agreements which led to mounting circular debt.

“Yes, oil and gas firms are supplying fuel to power sector and other clients in breach of their agreements following pressure of the government,” an official in the Oil and Gas Development Company (OGDC) said. He said that company was forced to continue supply as they were instructed to by the government.

Spokesperson of the Pakistan State Oil (PSO) said that Kot Addu Power Company (Kapco) was to make payments seven days prior to the commencement of the payment period. Therefore as per agreement, Kapco was on a schedule for advance payments and had no credit facility. Genco-III was to pay PSO after 20 days upon receipt of furnace oil on the actual quantities received and Genco-III had access to a credit facility with PSO. However, there were no supply agreements between PSO and Genco-I (Jamshoro) or Genco-II (Guddu). Hub Power Company (Hubco) was liable to pay its payments against fuel supply in no more than 14 days after receipt.

An official from PSO said that it was providing fuel to power sector in breach of agreements following instructions of the government. He said that power sector was receiving late payment surcharges from the power consumers but it was not paying financial charges on late payments to PSO. He said that PSO’s profitability had been eroded due to late payments by the power sector as PSO had to pay higher mark up on its banks loans.

According to the break up available with The Express Tribune, PSO, OGDC, Pakistan Petroleum (PPL), Sui Southern Gas Company (SSGC), Sui Northern Gas Pipelines (SNGPL), Government Holdings (Private) Limited (GHPL) and Mari Gas Company were to receive Rs447.7 billion under circular debt as of December 4, 2012.These companies were to pay Rs113.72 billion, facing a burden of Rs333.52 billion.

PSO was to receive Rs108.116 billion against payment of Rs17.79 billion to refineries. OGDC was to receive Rs118.8 billion from refineries and gas companies, Water and Power Development Authority and Karachi Electric Supply Company against payment of Rs221 million.

PPL was to receive Rs56.4 billion and it had paid nothing, whereas, SSGC was to pay Rs77.9 billion against payments of Rs53 billion. The receivables of other companies are as following: SNGPL Rs44.2 billion, GHPL Rs21.12 billion and Mari Gas Company Rs20.4 billion. 

Published in The Express Tribune, December 16th, 2012. 


Howdy | 8 years ago | Reply

How long will we tolerate theft by the consumer who do not pay WAPDA and then WAPDA does not pay the power companies which do not pay PSO and the Gas companies. Cut connections and name and shame these people, if they still don't pay lock them up. If we don't take stand now watch the whole house of cards fall.

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