ALMOST two months after it happened, we are finally beginning to get a credible picture of what really led to the petrol crisis in early January.

The financial results just announced by PSO include data from the crucial second quarter ending Dec 31, 2014, when the crisis germinated before emerging in its full-blown form early this year.

Know more: PSO profit plunges 73pc to Rs4.3bn in July-Dec

The data paints a startling picture. Profit after tax plunged by 73pc in the six months from June to December, compared to the 150pc growth that was recorded in the same period last year.

The company says inventory losses of Rs2.7bn, compared to a gain of Rs6.4bn in the same period last year, explain some of this drop.

The rest of the drop is explained by lower receipts of late payment surcharges from the power sector — Rs3bn in the first half compared to Rs11bn last year.

The results appear to vindicate the line taken widely by the media and financial analysts during the crisis that the liquidity problems of PSO lay behind the problem.

The line taken by the government, and at least two inquiry commissions constituted by it, was that mismanagement led to the crisis. It is true that the oil supply chain suffered from crucial weaknesses, such as a weak stock position, but those issues are as structural as the circular debt.

It is hard to discount the impact of the sharp deterioration in the financial position of the company as revealed in financial results, which hampered its ability to arrange fuel shipments.

Further, many of the deteriorating financials are connected with the power sector, from margins on furnace oil to late payment surcharges from the power sector, and strengthen the argument that ultimately it was the circular debt and its impact on the company’s finances that led to the petrol crisis.

It is sad that this picture is emerging after two separate inquiry reports produced by government-appointed commissions, neither of which gave sufficient prominence to the financial issues of the company and the circular debt, a few words to the effect notwithstanding.

The full results are to be released later, and they will help build a more detailed picture of what went wrong in early January. There might be a temptation for the new management of PSO to use the interval to package their results in a way to not contradict the government’s story, but this temptation should be resisted.

Published in Dawn March 4th , 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play