ISLAMABAD: With furnace oil supplies at a critical point, the ministry of finance has declined to release Rs25 billion ordered by the prime minister 10 days ago to oil suppliers and power companies to ease the circular debt and energy crisis in the country.
An official told Dawn on Monday that the finance ministry had expressed its inability to provide more than Rs10 billion and that too perhaps after Eidul Fitr.
He said the entire budget could not be held hostage to the power sector which must manage its affairs within available resources and also within the budget ceilings.
“The finance ministry has to ensure a tight fiscal policy to manage fiscal deficit,” he said.
While presiding over a meeting of a special committee on energy crisis and circular debt on August 19, the prime minister had directed the ministries of Finance and Water and Power to release Rs25 billion to Pakistan State Oil and to independent power producers (IPPS) by September 15 to enable them to generate electricity to a level that “people are subject to minimum loadshedding during Eid holidays”, according to a statement issued by the prime minister’s media office.
Even after that meeting, a finance ministry official while commenting on release of Rs25 billion ordered by the PM had told Dawn that “this might be their understanding, not ours”.
An official of the ministry of petroleum said Petroleum Secretary Ejaz Chaudhry had spoken to Finance Secretary Dr Waqar Masood Khan to enquire about the money injection desired by the prime minister.
The feedback was that an amount of Rs10 billion would be released and not Rs25 billion, but it is not yet clear when the transaction would actually take place as Eid holidays start on Wednesday.
The official said it was also not yet clear if the Rs10 billion would be released to the Pakistan State Oil, the main fuel supplier, or to the independent power producers (IPPs) who had already served notices to invoke sovereign guarantees of Rs31 billion by September 25.
“Even if the payment is made now, it will be impossible to ensure fuel supplies in view of Eid holidays,” the petroleum ministry official said.
“The situation is grim and grave and the PSO is really in dire straits,” the official said, explaining that its receivables had crossed Rs150 billion from the power sector. He said the oil supplier had to arrange every month five to six ships of up to 50,000 tons each of fuel and it was on the verge of default on international letters of credit.
“The ministry of petroleum and PSO will not be able to honour their LCs after September 12,” the official said.
He said the secretary petroleum had requested the prime minister and then written to the finance ministry and the prime minister secretariat for a payment of Rs80 billion to improve PSO’s overall cash flows with an indication that at least Rs35 billion was necessary to meet international obligations and keep the cycle running in the immediate future. Already, the two major independent power producers – Hubco and Kapco — with a combined capacity of about 2,700MW have reduced production to almost one third due to fuel constraints.
The official said the prime minister was also informed that the fuel supplies would not be possible unless Rs35 billion were not paid but the problem was power companies were unable to recover their billed amounts. He said the federal government had asked the provincial governments to ensure their payments on emergent basis but recoveries had been a total disappointment.
But despite all the governance and capacity constraints, the closure of industrial sector for about eight days on account of Eid holidays has come to the rescue of the government to avert an extreme electricity crisis. A 2500MW of consumption would come down because of the industrial closure.
The petroleum ministry official said the ministry had made arrangements for full fuel supplies during Eid holidays despite transportation and financial problems. Also, it was making efforts to ensure 76 million cubic feet of gas to two IPPs which were to close down upon closure of the Qadirpur gas field on August 28 for annual maintenance.
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