ISLAMABAD, Nov 28: The ministry of petroleum has declined a power ministry’s request for supply of furnace oil for public and private sector power plants on credit, saying it could not order fresh imports unless Pakistan State Oil (PSO) had sufficient cash in hand.
Informed sources told Dawn on Wednesday that secretary water and power Nargis Sethi has made a written request to the petroleum ministry to prevail upon PSO to provide furnace oil for power production on short-term credits and had promised to flow recoveries of electricity bills directly to the fuel supplier.
These sources said the prime minister’s adviser on petroleum and secretary petroleum, however, took a firm stand against supplying fuel on credit, saying the PSO would provide fuel supplies only against advance payments.
The petroleum ministry also informed the water and power ministry that the PSO had defaulted in its international obligations for at least three times in the recent past and friendly channels had to be utilised at the highest level to avert a call on sovereign guarantees and a resultant crisis situation.
International default has long-term ramifications for the Pakistan State Oil and the country and hence the petroleum ministry or PSO could not afford such an eventuality, the ministry of water and power was informed.
The sources said the PSO had over 265,000 tons of fuel stocks that were more than sufficient for almost 12 days of full requirement of the power sector and more shipments were in pipeline but fuel would be released to power sector only against advance payments.
“Fresh letters of credit would be opened for more fuel imports once PSO was provided with sufficient funds”, the power ministry was informed.
A petroleum ministry official said a tight supply policy and aggressive recovery campaign by the PSO had helped reduce its receivables from about Rs242 billion in August this year to about Rs132 billion as of November 26 and hence it had been given full support by the petroleum ministry not to show complacency.Of these receivables, power sector alone owed Rs118 billion to PSO. This included Rs41 billion against public sector distribution companies, Rs58 billion against Hub Power Company, Rs8 billion against Kot Addu Thermal Power Company and Rs11 billion against Karachi Electric Supply Company.
On the other hand, the PSO’s payables that had gone beyond Rs158 billion a couple of months ago had been brought down to about Rs30 billion. This included Rs22 billion payable to Pak-Arab Refinery Limited, Rs4 billion to Attock Refinery and Rs2 billion to Pakistan Refinery Limited.
The sources said the power ministry was already under political pressure to ensure minimum load shedding until March-April when the election campaign would be in full swing but gas shortages and annual canal closures (December 25–January 31) were going to create a serious power shortage.
The load shedding has already increased to four-five hours a day in big cities even though gas demand has started to go up and hydropower production has started to go down owing to reduced watering requirements by the provincial governments.
The gas shortfall currently hovering around 800-900 million cubic feet per day has been anticipated to touch 1.8 billion cubic feet per day (BCFD) in peak winter owing to a three-times surge in consumption in the household sector.