ISLAMABAD:
The country is on the verge of a massive power crisis as the stock of furnace oil for power generation has been exhausted due to Pakistan State Oil’s (PSO) inability to replenish it through imports due to lack of funds.
Sources close to the director general of oil in the Ministry of Petroleum and Natural Resources told The Express Tribune that PSO’s stock of furnace oil has been fully used up and there is no supply for power plants for electricity generation.
“Owing to the issue of circular debt, power plants have maintained only two to three days of oil reserves, but now these have been completely consumed,” a source said, adding that the country was now utilising the stock of diesel to partially run power plants.
Despite PSO’s constant warnings, the federal government has failed to take measures to release funds through either the finance ministry or the power sector.
Sources added that the petrol and diesel reserves were also not satisfactory for PSO, which is taking the products from Shell.
Petroleum ministry officials said that PSO had requested for the release of Rs46 billion to restore the Letters of Credit (LC) which were blocked but the finance ministry released only Rs10 billion.
“The finance ministry is now expected to release Rs15 billion to bail out the company which has inflated receivables of over Rs200 billion,” said an official, adding that PSO would be required to streamline the furnace oil supply for at least 20 days if it receives the money.
In a letter sent to the petroleum ministry on December 30, 2014, PSO said that power sector receivables and their potentially adverse effects are causing a negative impact on the entity’s business viability.
In view of these receivables standing at Rs198 billion, PSO authorities added, they had also incurred penalties of approximately Rs250 million on account of delayed payments to banks for the October to December 2014 period.
Cash cycle suffering
The company also paid $1.8 million in demurrages from July to November 2014 and the supplier claims of $6.4 million due to delay in use of vessels and in opening of LCs respectively.
In view of the above situation, officials said that PSO was not able to open further LCs as the credit limit stands exhausted and the credit line of Rs110 billon is blocked.
PSO is left with no choice but to freeze its business with the power sector once current supplies are completely exhausted.
PSO had said that it could commence business with the power sector once its receivables were cleared or at least all liabilities on account of demurrages, damages to banks and suppliers are written off.
It also highlighted that lack of financing due to the power sector would also affect white oil supplies and its imports because of the blocking of LCs. The entity added that it was unable to continue supplies to the power sector and will stop further supplies of furnace oil unless its liabilities are discharged.
PSO had sought permission from the petroleum ministry to deal with the power sector as per contracts.
Published in The Express Tribune, January 15th, 2015.
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COMMENTS (42)
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@ABKhan Man, its simple. The states which have surplus electricity like Bengal, or Punjab, will be better off if they can export electricity to neighboring countries, like Bangladesh or Pakistan respecitively, rather than other Indian states because of geographical location. Its a matter of applying common sense.
@BruteForce:
"Some states have 24/7 Electricity my friend. Eg: Gujarat. Gujarat has electricity surplus that India tried selling to Pakistan"
Why the genius ruling your country didnt divert the surplus to other areas of the country which face blackouts for long periods?
@Razi: The comment by you is more apt for Pakistan. Your leaders decided to bleed India by thousand cuts. In the blind pursuit of their stated goals they forgot to govern the country. Now the result is that you have cur yourself and bleeding to slow death.
@unbelievable:
Some states have 24/7 Electricity my friend. Eg: Gujarat.
Gujarat has electricity surplus that India tried selling to Pakistan. But, the geniuses who rule your country said they don't need it. :)
@Prakash:
India should first try to provide electricity to its citizens, before offering to others.
@Gp65
Problems are created by India on the LOC. But since your mindless nationalism will not allow you to see the other side of the story, you will continue to carry this inability to be dispassionate while commenting on Pakistan.
But we just gave Rs 6.5 BILLION as export subsidy to ( yes ) our POOR SUGAR BARONS.
@unbelievable: "You have more load shedding, dying population, poverty and the rest. Still you dream of being Asian power, even surpassing China. Talk about priorities." Man, in this part of India we have forgotten what power cut is. Check this link https://energypedia.info/wiki/WestBengalEnergy_Situation
The big question is: Why are power plants not paying PSO for the oil they buy from them when they take all the electricity bills from consumers right on time and with heavily added charges...... Same goes for other companies like PIA and Railway..........What kind of banana republic is this... buy but not pay !!
its ok, we can use candles....democracy is the best revenge !
@BruteForce: You have more load shedding, dying population, poverty and the rest. Still you dream of being Asian power, even surpassing China. Talk about priorities. How about explaining, whats your India doing these days?
Your defense budget is increasing by creating problems on LOC even as PSO is starved of funds. Is this a problem of PML-N governance or national priorities? Should you lbame your PM who tried to bring peace on LOC and border so as to cut down defense expense or those who sabotaged his eforts in that direction?
Please note even if the bus project that everyone loves to trash was actually stopped, it would it generate adequate funds for PSO. But does the. Ountry have the will to do whAt it needs to?
@woody: You said it. This was exactly my point when Pakistan was gung-ho on IP pipeline. This is a financial emergency not an energy emergency that Pakistan is experiencing.
@Prakash: Pakistan can wait thousands year before electricity can be supplied from India.
Economic planning in Pakistan is tied to what it was three decades ago. PMLN is caught between 'frying pan and the fire.' All talk and 'no show.' Salams
Not only this, all petrol pumps in Lahore are closed due to no supply of oil. I asked an employee of Shell in Johar Town and he said that supply is suspended for uncertain time. Roshan Pakistan!
In the mean time, NS jets off to another foreign trip.
India has in the past offered to supply electricity to Pakistan. Maybe it is time to consider the offer seriously. Oh sorry, I forgot, Pakistan would first like to settle the Kashmir issue before talking with India on any other matter.
@Ranjha: It's going to be the same usual rants against Imran Khan and his dharna.
Good governance of Shareef Brothers
16 Hours daily load-shedding and yet a massive blackout ahead, but there is a positive side of this load-shedding, I have read every book that I have collected in last ten years, every page and every word.
@Ranjha: Whith a hidden smile behind his moustache he will only say "It is becasue of IK's second marriage".
Love the "oligipolines' in this country, energy textile, communication real estate.... 220 million bawakoof kom.
Lets see what supporter of this government will say, even after 60% price reduction in oil prices we are still deprived from electricity and now not even having stocks, a simple word for this government.. its a shame
So PML N is no Different than PPP.. So called good governance . exemplified
@Ranjha: Pervaz Rashid is the information minister. Prime Minister's other two relatives Khawaja Sahib and Abid Sher Ali are running these affairs. So expect them to be answerable in this regard. Just see the twitter feed of Abid Sher Ali ( Our Minister of State for Water & Power ) . He is more interested in selling the Religion and in Political Point scoring rather than anything else. Because Abid Sher Ali knows that he is from King Nawaz Sharif family and no one can take any action against him
https://twitter.com/abidsherali
Another massive failure of the third timer. They suffocated PSO of funds crippling its ability to purchase. Funds diverted to "jungla bus" project. People shouldn't complain.
May be a plan to push govt to increase oil prices.*
Ab kya ho gaya hai? Pakistan didn't have money when oil was at $100. What is wrong now? Oil is at $45 !! Maybe all the savings were diverted to...
Stop building nukes with all the aid money. Nukes are no good if you don't have a nation left to defend.
8.2 million dollars in fines? If this was the private sector, people would be fired and would never work in the industry again. Public sector, they get a promotion. Who is responsible for this?
The persons to bring this situation are: 1. Secretary Finance.....for some reason he is very against Petroleum Industry 2. Minister of Petroleum himself for obliging the concerned.
Those responsible for this mass blackout must be prosecuted by Military Courts ++++++++++++++++++++++++++++++++++++++++++++++++++++ And hung from the nearest pole.
This is pathetic..the citizens of this country deposit electricity bills every month..whose responsibility it is to make sure the money is utilised properly for power sector..Alas the shameless government is spending billions on acquiring lands for motorway nd metroes but they dont cate about loadshedding...thats why I firmly believe this country can only be run properly under military rule..
Where is PML N and its incompetent team ????????
Something is not right. Why is load shedding not being ended when furnace oil prices have crashed. It is now very viable to run power plants with furnace oil. Previously burning furnace oil was not cost effective and therefore led to the creation of the circular debt. However now it is profitable so what is the government hiding?
Pakistan has about 100+ nukes, Cruise missiles, F16s, but no Electricity, nor Oil to generate it.
The priorities of Pakistan has always been to fight India, than to provide for its people.
ahahahhaaahhahah....... PML in action or inaction. Pakistan deserves this.
If you don't have the money to buy fuel for a power plant when the energy prices are low --- maybe the energy shortage is really a money shortage? Further - if you can't afford fuel for your current power plants what makes you think you can afford to buy fuel for all those mega power plants Sharif keeps talking about ... and where are you going to find the money to build those mega power plants. Maybe it's time for a reality check?
Let us see what Pervez Rashid has to say about that!