ISLAMABAD, June 2 The Senate's standing committee on petroleum and natural resources has called for re-nationalisation of the Karachi Electric Supply Company and said the power sector crisis was hurting the economy.

A meeting of the committee, presided over by Senator Sabir Ali Baloch here on Wednesday, decided that a joint meeting of the Senate standing committee on power and the Senate committee on petroleum would be held on June 9 to resolve the issue of circular debt.

The committee was informed that because of the constant failure of Pepco and KESC, oil companies and refineries were on the verge of financial collapse.

A finance ministry official told the committee that Pepco and Wapda's losses would surpass all aid the country would receive in the next fiscal year.

Senator Haroon Akhtar said the power sector had become a 'black hole' and all government subsidies and support were going to waste.

The committee was informed that Rs40 billion in subsidies had been provided to the KESC during the current fiscal year. The utility has to pay Rs44 billion to power generation companies and PSO.

PSO managing director Irfan Qureshi said the government should make payments to the company because its import consignments were backed by LCs. “If one LC defaults it will take four months for the country to recover its status and image among international financial circles.”

Mr Qureshi said that instead of refineries the government should make payments to the PSO first because it was an international issue.

However, his statement was countered by Attock Refinery managing director Adil Khattak, who said that ARL was the main supplier of fuel to the armed forces and to the people living in the country's north.

“Would anyone want to see the armed forces, including the air force, go dry? Besides, what would happen to crude being produced in Punjab and Khyber Pakhtunkhwa,” Mr Khattak asked. He said that PSO had to pay Rs95.16 billion to five refineries, including Rs15.94 billion a year in interest to banks for delayed payments.

Mr Khattak said that because of cash problems refineries were unable to make payments to oil companies and crude suppliers, including international companies.

“As a result production of refineries has declined. Attock Refinery is running at 88 per cent capacity, National Refinery at 77 per cent, Pakistan Refinery at 60 per cent, Parco at 65 per cent and Bosicor at 50 per cent.”

The PSO managing director said that being a public sector company, PSO was bound to supply furnace oil to power producers, but as they were not making payments, the total amount owed to the organisation had reached a staggering Rs131 .26 billion.