ISLAMABAD: With the circular debt issue still unresolved, three major refineries have stopped oil supplies to Pakistan State Oil and two others have threatened to do the same if their dues are not cleared.The PSO sent on Wednesday an “SOS” to the prime minister's adviser on petroleum and ministers for finance and water and power for immediate payment of Rs60 billion to avert a shortage of petroleum products in the country.
In his last communication to the federal government, PSO's outgoing managing director Irfan Qureshi said: “Attock Refinery Limited, National Refinery Limited and Byco have already discontinued supplies to PSO while Parco and Pakistan Refinery Limited have expressed their inability to continue supplies because of financial constraints. This will ultimately lead to severe shortage of POL products in the country.”
The refineries have taken the extreme step because of PSO's inability to clear about Rs100 billion dues. The PSO's own receivables from power sector and the government of Pakistan on account of price differential claims reached Rs181 billion on April 20.
The country's largest fuel supplier said that from Feb 1 it had supplied oil worth Rs78 billion to the power sector but received only Rs45 billion. The remaining Rs33 billion and the opening balance of Rs148 billion on Feb 1 have left the PSO in dire straits. It has already defaulted on its tax obligations and is on the verge of international default on Rs39 billion in 21 days.
The PSO said it immediately needed Rs60 billion to avoid default on international payments and to clear its dues to tax authorities and local refineries.
Last week, the fuel supplier had expressed its inability to import furnace oil for power generation.
“The circular debt issue has now reached a point where the PSO expresses its inability to be able to continue its furnace oil imports from May onwards.
“With no financial limit available and all our bank borrowing limits exhausted, we have no option, but to suspend import of fuel oil from May 15, 2011 to avoid any default and create a bad image of Pakistan in the international community.”
The government plans to issue term finance certificates of Rs130 billion to the local banks, but no concrete step has been taken because of the absence of the finance minister and finance secretary who have been in Washington for talks with the International Monetary Fund and other lenders.
Because of water and gas shortages, power companies are already resorting to more than five hours of loadshedding which could escalate if furnace oil supplies are affected.