In a disturbing development, Pakistan State Oil (PSO) has once again failed to pay international and domestic fuel suppliers within the set timeframe and could not clear the letters of credit opened for oil imports because of a dearth of finances.
“PSO defaulted on Saturday following its inability to clear Rs45 billion owed to local and international fuel suppliers, which has dealt a blow to the credibility of the state-run oil marketing giant,” an official said.
A few months ago, the company had also failed to clear five letters of credit after delay in payments from oil purchasers, particularly power generation companies.
In an attempt to cope with the financial crunch, PSO has issued a Save our Soul (SOS) request to the prime minister and the ministries of finance, petroleum and water and power, asking them to release Rs100 billion immediately, but no major amount has been provided so far.
Receivables of PSO from different enterprises, mainly power companies, have surged to Rs221 billion, officials say. Of these, power companies owe a major share of Rs199 billion.
“PSO is making desperate moves to get the money released, but has received no encouraging signals yet,” the official said while pointing out that the finance ministry had already released Rs15 billion to the independent power producers (IPPs), which had invoked sovereign guarantees.
According to officials, the finance ministry stressed that it had released Rs15 billion to cover power price differential claims and now it had nothing to pump more into the energy sector.
“If the government does not provide money, PSO will be facing a worst liquidity crunch and the revival of letters of credit will take around 45 days,” cautioned a senior official of the Ministry of Petroleum and Natural Resources.
International oil suppliers are also reluctant in the wake of the default and are seeking advance payments.
For the first time, PSO’s receivables have risen to Rs221 billion during the tenure of the present government and the company is teetering on the brink of financial collapse.
“We have informed relevant ministries and the premier about the company’s financial constraints and ballooning receivables,” a PSO official said.
“We have also stopped paying domestic oil refineries and oil supplies in the country could be disturbed if our bills are not cleared. Power producers are the major defaulters as they are not paying for oil purchases on time.”
On the other hand, the petroleum ministry official said they were doing their best to supply oil to the power producers, but some issues needed to be addressed.
“In the past too, PSO was promised a timely release of funds for a smooth flow of oil imports, but the promise was never kept and the company had to face serious financial and supply problems,” the official added.
Published in The Express Tribune, December 21st, 2014.
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