PSO seeks release of Rs150b to avert default

Finance ministry to provide money only after meeting IMF.

ISLAMABAD:

As the gap between electricity demand and supply widens with increasing temperature, Pakistan State Oil (PSO), a key fuel supplier to power plants, has asked the government to release Rs150 billion in a bid to save the company from default on payments to international banks and fuel suppliers.

According to sources, in an SOS sent to the ministries of finance and water and power, PSO said it would require Rs150 billion next month to clear loans of banks and retire letters of credit opened for oil import.

The government is striving to enhance fuel supply to power plants in May, June and July – months when electricity demand hits the peak due to hot weather – to enable them to generate maximum electricity to overcome shortages, which are sparking sporadic protests in different parts of the country.

However, the Ministry of Finance insisted that it would consider releasing the money after negotiations with the International Monetary Fund (IMF), which has called for substantially reducing power subsidy, officials familiar with the developments said. The ministry had already provided Rs20 billion to PSO last week, they said.



Officials were of the view that the government was holding back payments under price differential claims – or subsidy on power supply – in an attempt to keep budget deficit within the ceiling set in the budget for 2013-14.

According to them, PSO’s receivables against fuel buyers, mainly power producers, have surged to Rs155 billion. The company will also have to repay next month a loan of Rs30 billion taken from commercial banks to import oil for meeting growing needs of power plants.

IPP Advisory Council Chairman Abdullah Yousuf commented that the government had failed to honour the promise of bringing improvement in power production as independent power plants (IPPs) were operating in tough conditions.

The Pakistan Electric Power Company (Pepco) owed Rs300 billion to the IPPs for power purchase, he said, adding plants were not running at full capacity because of financial problems.

“The plants are running at varying capacities and the situation could worsen if payments are not made,” Yousuf said, suggesting that the government seemed to be delaying payments in order to rein in the budget deficit.

He noted no improvement in recovery of power dues despite clearance of about Rs500 billion in inter-corporate debt in the energy chain in June last year.

Power producers had taken up the issue with the government, but were yet to see any remedial measures, he said.

Talking to The Express Tribune, Indus River System Authority spokesman Khalid Idrees Rana said hot weather had led to an increase in water flow in the rivers due to melting of snow on the glaciers.

Water supply would be better this season and help increase production of hydroelectric power, he added.

Published in The Express Tribune, April 29^th, 2014.

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