Lease of fuel storages to PSO requires huge investment
Company, power ministry to decide on modalities, capital injection.
In the first phase, only Jamshoro fuel storages will be taken on lease and later operational tanks of Muzaffargarh thermal power plant will be brought under PSO’s control. PHOTO: FILE
ISLAMABAD:
As the International Monetary Fund (IMF) pushes Pakistan to lease fuel storage and delivery facilities of power generation companies to Pakistan State Oil (PSO), the Ministry of Water and Power and PSO are locked in a row over making heavy investment to press on with the plan.
The move to lease the facilities to PSO – the oil marketing giant – comes in a bid to stop large-scale furnace oil theft worth $200 million per annum, sources say.
PSO had to take control of the oil storage and delivery points of generation companies by the end of August last year and then by December 28, but it missed the deadlines because of some hurdles.
Sources said PSO wanted to accept the fuel storage facilities in a phased manner, which required huge investment and hiring of trained manpower. In the first phase, only Jamshoro fuel storages will be taken on lease and later operational tanks of Muzaffargarh thermal power plant will be brought under PSO’s control.
“This will take one and a half years. Since a huge capital is needed with no returns, no additional lease/fee can be paid to generation companies or unless the same cost is allowed to be passed on through the fuel price adjustment mechanism,” a PSO official said.
Modalities were being finalised to implement the plan but the cost issue was yet to be decided with the water and power ministry, the official said.
Estimates suggest that four power generation companies consume $2 billion of furnace oil in a year and a powerful lobby manages to steal a hefty quantity valuing about $200 million and mixes water with oil in the tankers.
According to sources, fake invoices about supply of furnace oil to storage tanks are issued quite often and oil is taken away before it reaches the power stations. Power companies and the oil supplier put the blame on each other for the loss.
Now, in an attempt to crack down on the practice and minimise the fuel loss, the government could hand over fuel storage and delivery facilities of state-owned generation companies to PSO, also a state concern.
In response to the move, sources said, the PSO management had expressed serious reservations, stressing any such decision would be subject to certain conditions.
PSO wants to know when Jamshoro and Muzaffargarh thermal power plants are going to be converted into coal-based plants since there is no point in investing when these are being shifted to coal.
PSO says it will be in a position to take over oil tanks only if they are in operational condition. Most of the tanks in Muzaffargarh are dilapidated and are not fit to be put to use for other by-products. They require massive investment in revamping.
According to sources, PSO stresses that the company has very limited manpower and resources, not enough to take over and revamp fuel tanks of power generation companies. The company will have to recruit and train the required manpower, which will take considerable amount of time.
Published in The Express Tribune, February 6th, 2014.
As the International Monetary Fund (IMF) pushes Pakistan to lease fuel storage and delivery facilities of power generation companies to Pakistan State Oil (PSO), the Ministry of Water and Power and PSO are locked in a row over making heavy investment to press on with the plan.
The move to lease the facilities to PSO – the oil marketing giant – comes in a bid to stop large-scale furnace oil theft worth $200 million per annum, sources say.
PSO had to take control of the oil storage and delivery points of generation companies by the end of August last year and then by December 28, but it missed the deadlines because of some hurdles.
Sources said PSO wanted to accept the fuel storage facilities in a phased manner, which required huge investment and hiring of trained manpower. In the first phase, only Jamshoro fuel storages will be taken on lease and later operational tanks of Muzaffargarh thermal power plant will be brought under PSO’s control.
“This will take one and a half years. Since a huge capital is needed with no returns, no additional lease/fee can be paid to generation companies or unless the same cost is allowed to be passed on through the fuel price adjustment mechanism,” a PSO official said.
Modalities were being finalised to implement the plan but the cost issue was yet to be decided with the water and power ministry, the official said.
Estimates suggest that four power generation companies consume $2 billion of furnace oil in a year and a powerful lobby manages to steal a hefty quantity valuing about $200 million and mixes water with oil in the tankers.
According to sources, fake invoices about supply of furnace oil to storage tanks are issued quite often and oil is taken away before it reaches the power stations. Power companies and the oil supplier put the blame on each other for the loss.
Now, in an attempt to crack down on the practice and minimise the fuel loss, the government could hand over fuel storage and delivery facilities of state-owned generation companies to PSO, also a state concern.
In response to the move, sources said, the PSO management had expressed serious reservations, stressing any such decision would be subject to certain conditions.
PSO wants to know when Jamshoro and Muzaffargarh thermal power plants are going to be converted into coal-based plants since there is no point in investing when these are being shifted to coal.
PSO says it will be in a position to take over oil tanks only if they are in operational condition. Most of the tanks in Muzaffargarh are dilapidated and are not fit to be put to use for other by-products. They require massive investment in revamping.
According to sources, PSO stresses that the company has very limited manpower and resources, not enough to take over and revamp fuel tanks of power generation companies. The company will have to recruit and train the required manpower, which will take considerable amount of time.
Published in The Express Tribune, February 6th, 2014.