ISLAMABAD: With the circular debt now at about Rs500 billion, the country’s largest fuel supplier, the Pakistan State Oil, is under extreme government pressure to ensure uninterrupted supply of 28,000 tons of furnace oil to the power sector even though its unpaid bills are increasing by about Rs3 billion a day.
“For the past five days it is only the PSO that is facing all kinds of pressures from top government offices to ensure fuel supplies and reduce loadshedding,” a member of the cabinet committee on energy told Dawn. Its receivables have now touched Rs227 billion. The daily increase in its receivables fluctuates between Rs2.5 billion and Rs3 billion.
He said former petroleum secretary Muhammad Ejaz Chaudhry and PSO managing director Naeem Yahya Mir were directed by a top office to meet maximum fuel requirements of the power sector. They protested over non-payments and insisted that the power sector should pay at least for fresh supplies to keep the fuel cycle running.
“Increase fuel supplies to 28,000 tons per day or face the music,” a member of the energy committee was quoted as telling Mr Ejaz Chaudhry and Mr Naeem Mir. With PSO’s receivables at about Rs210 billion, Mr Chaudhry is reported to have expressed his inability to oblige as principal accounting officer and was removed immediately as petroleum secretary.
Mr Naeem Yahya Mir has since increased the fuel supplies to 26,000-27,000 tons a day over the past four days, a member of the committee said. The average cost of furnace oil being supplied by PSO comes to about Rs3 billion a day but it is getting payments only in millions and that too after a couple of days.
“This cannot go on for long. The PSO is going to default on international payments. It is already in default on payments to domestic refineries,” said the source, adding that perhaps the government would release a few billion when payment deadline with Kuwait Petroleum Company came closer but in the process the domestic refining sector and oil and gas producers were in a difficult condition.
A cabinet member said the receivables of the Oil and Gas Development Company (OGDCL) alone had crossed Rs150 billion.
Refineries, he said, were not making payments to the OGDCL since PSO was unable to clear their dues.
The results of inefficiency and non-recoveries of the power sector have been thrust on the oil sector, the official said. He added that the ministry of petroleum had requested the energy committee and the finance ministry last week to provide at least Rs12 billion to help PSO ensure supplies but had not received anything yet.
He said that instead of clearing Rs202 billion of outstanding amounts at the start of this month, PSO’s receivables had gone up by about Rs15 billion since then. PSO’s total payables have crossed Rs200 billion.
After a payment of about Rs4.5 billion on June 27, it was receiving payments in a few millions while the dues kept building.
There is going to be a mammoth increase in circular debt by the end of this month, he said. “We are not only supplying fuel to Wapda companies on credit but also compelled to provide furnace oil to independent power plants without any payment,” a petroleum ministry official said.
The power and finance ministries, on the other hand, are still not ready to reconcile over the amount of subsidy. The data exchanged so far suggest a wide gap of about Rs90 billion between estimated receivables and payables. The power ministry wants a government subsidy of Rs383 billion but this appears to be unacceptable to the finance ministry.