PSO's financial crisis worsens: government unable to come up with Rs 15 billion

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The financial crisis of Pakistan State Oil (PSO) deepened with the Finance Ministry's inability to arrange Rs15 billion to enable it to pay international fuel suppliers against letters of credit payments.

On February 6, PSO management requested the federal government to release Rs15 billion to clear LC payments to Kuwait Petroleum Company (KPC) and other international fuel suppliers due on February 8.

"We are running from pillar to post to arrange Rs15 billion without securing any result. To find a solution, a meeting was called by Prime Minister Raja Parvez Ashraf, which was attended by Minister for Water Power, PM's Adviser on Petroleum, the Finance Minister and other top officials, but the meeting was unable to come up with a clear solution," sources said. In the last week of January, PSO management requested the federal government for Rs10 billion for making a payment against international LCs; On February 1, the government released Rs8 billion, the source said.

PSO has to retire over Rs55 billion dues against international Letters of Credit (LC) payments during the current month, while the government so far has only provided Rs8 billion with an additional Rs5 billion expected to be released within a few days, sources said on Sunday.

They said that PSO's total receivables from power and other sectors crossed Rs155 billion mark, while it has to pay a total of Rs99.53 billion to Kuwait Petroleum Company (KPC) and other international fuel suppliers.

On September 11 last year, the federal government issued Rs82 billion TFC (Term Finance Certificates) subscribed by OGDC (Oil and Gas Development Company) to settle part of the intractable circular debt aimed at providing a breather to energy sector companies. However, the inter-circular debt continues to plague the sector leading to severe liquidity problems, compromising PSOs ability to make payments against LCs.

"PSO is supplying 22,000 tons of fuel to power generation companies daily on the directives of the government since December 20 last year. One ton furnace oil costs Rs86,000 which means that on a daily basis, PSO provides fuel worth Rs1.9 billion and over the past 53 day, we have supplied fuel worth Rs100 billion to power houses," a PSO official said.

If the national fuel giant fails to make payment on time to fuel suppliers, the company will default on its LC payments, which would have serious consequences for not only PSO but for the country.

Default would further damage PSO's liquidity position, forcing global fuel suppliers not to enter into business deals with PSO which, in turn, would create an acute energy crisis in the country.

At present total receivables of PSO from power and other sectors stand at Rs152 billion, of which Rs52.2 billion are owed by Wapda, Rs61.8 billion by Hub Power Company (Hubco), Rs13.48 billion by Kot Addu Power Company (Kapco), Rs1.7 billion by Pakistan International Airline (PIA), Rs511 million by Oil and Gas Development Company Limited (OGDCL), Rs9.22 billion by Karachi Electric Supply Company (KESC), Rs573 million by National Logistic Cell (NLC), Rs1.5 billion by Independent Power Plants (IPPs) and Rs1.29 billion by Pakistan Railways.

The company is to receive Rs1.62 billion on account of audited price differential claim of High Speed Diesel (HSD), Rs3.4 billion on account of price differential on Low Sulphur Fuel Oil & High Sulphur Fuel Oil (LSFO/HSFO), Rs1.36 billion on account of price differential on imported PMG and Rs3.91 billion price differential under GLMP.

PSO total payables to local refineries stands at Rs34.35 billions including Rs20.74 billion to Pak-Arab Refinery Limited (Parco), Rs1.08 billion to Pakistan Refinery Limited (PRL), Rs238 million to National Refinery Limited (NRL), Rs8.6 billion to Attock Oil Refinery Limited (ARL), Rs2.84 billion to Bosicor and Rs842 millions to others.

Courtesy: Business Recorder

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