LAHORE: The country is left with oil stock of less than three days and its import has totally dried up as the Pakistan State Oil defaults on its payments and says it will need at least Rs100 billion and eight weeks’ time to retrieve the situation.
According to PSO officials, no oil consignment has arrived at any port in the country for the past two weeks, whereas usually six to eight ships, each carrying 65,000 tons of oil, come to the country in a fortnight.
“The company has exhausted all its overdraft (OD) facilities over the past few weeks. All its LCs (letters of credit) lines have been choked as its total receivables now run over Rs215bn,” a PSO official said, adding that the power sector owed Rs190bn and PIA Rs12.5bn.
PSO defaults on its payments, needs Rs100 billion to retrieve situation
The company’s default on its payments to a few local banks has made all others cautious; no bank is now ready to underwrite PSO’s LCs. Exporters are also not ready to trust the PSO with their commodity without hard cash or bank guarantees.
“The piecemeal payments being made by the government cannot provide any relief to PSO given the size of default. On Thursday, the government released Rs17bn, but like all such previous payments, it went into retiring overdue drafts, making no impact on fresh imports.
“The company needs at least Rs100bn immediately to set things right. Even if it gets the required money, it will need another two months to line up imports and restore the supply line,” the official said.
“Apart from the financial crisis, it is ad hocism at the top that has landed the PSO into this ditch,” said another official.
“With the acting managing director sitting at the top of the company and being more interested in import of liquefied natural gas (LNG) — a new pastime of the PML-N — PSO has been sliding deep into crisis,” he said. “No one really knows how a bankrupt PSO will import LNG. Why has it not stopped supplies to the defaulting companies, be it IPPs (independent power producers) or the PIA?
“Why did the PSO remain content on small payments of a few billion rupees over the past year or so, which made no difference to the import?
“Why did other oil marketing companies (Shell, Total, Caltex), which are duty bound to keep stocks of at least two weeks, fail in their essential business obligation?” the official wondered.
All these questions, he added, needed to be answered and should be made part of an investigation into how the company had stumbled into the current crisis.
“The government is pressing local refineries to supply oil to the PSO on credit. If this happens, there may be some temporary relief in supplies in the days to come. But the situation will not improve in the long run unless the government arranges Rs100bn, and makes sure that the company gets regular payments from all its buyers,” the official said.
Published in Dawn, January 17th, 2015