ISLAMABAD, May 7: With fuel stocks at power houses down to a critical two-day requirement, the country’s largest fuel supplier —Pakistan State Oil — has faced a total of nine defaults on international payments because of serious financial crunch.
An official said that diesel consumption dropped by over 7 per cent in the last two months, suggesting a slowing down in overall economic activities, except for agriculture sector even though a bumper wheat crop was expected this season.A senior official said a furnace oil shipment due on May 5 was cancelled at the last moment because no bank was ready to open LC (letter of credit).
Another ship-load of furnace oil has been ordered to arrive on May 9 following disbursement of Rs10 billion by the federal government on the directives of the caretaker prime minister to ensure smooth supply on the three days around election-day.
“Even though oil and gas sector receivables against power sector have gone beyond Rs435bn, we are under strict instructions to ensure smooth fuel supplies for elections,” said a senior petroleum ministry official.
“The PSO has technically defaulted on international payments for nine times since August 2012,” he said, adding the bigger challenge is that a future default could lead to serious complications for the country because PSO handles more than 65pc of Pakistan’s fuel requirements. As a result, PSO has been forced to increase fuel supply to the power system to 20,000 tonnes per day from previous supply of 16,000 tonnes per day until Sunday.
The power sector owed Rs135bn to the PSO and another Rs300bn to the natural gas companies as of Tuesday, an official said.The latest Rs10bn disbursements to PSO were overdue at the start of April after which fuel supplies worth Rs10bn had been provided to the power sector.
While discussing poor recoveries from the power sector, a recent meeting was informed that system losses at Sukkur and Hyderabad Electric Power Companies had gone beyond 39 and 32pc, respectively, and nobody could question their chief executives because of their close relationship with former ministers of the PPP government.
As of May 7, PSO’s total fuel stocks stood at 10 days of requirement that was expected to slightly improve when a fresh shipment arrived on May 9.
However, all the power stations have an average of two-day of fuel stocks.
He said the PSO had refused to continue with fuel supplies because of non-payments but was prevailed upon to take another brunt in the national interest to ensure smooth supplies for elections.
When contacted, PSO’s spokesperson Maryam Shah said a furnace oil shipment of 70,000 tonnes was due on May 9 that would be sufficient to meet country’s power requirement for election period. She said the company also had sufficient stocks of diesel and petrol for retail sales to meet market demand for 15 and 10 days requirement.
She said the PSO’s total receivables had gone beyond Rs149.7bn on May 7, including Rs139.5bn against power sector.
As a consequence, PSO’s payables to international supplies have exceeded Rs83bn and another Rs29bn to domestic refineries.
Responding to a question on oil cargo cancellation, she said “no cargo has been cancelled by PSO so far. However, due to letter of credit confirmation issue, one of the cargo of furnace oil which was due on May 5 has been delayed.”
Regarding international defaults, she confirmed defaults but added: “we would clarify that it were due to technical issues in letters of credit that have resulted in delayed payments to international suppliers approximately nine times since August 2012.These issues arise due to non-payments of power sector.”
Despite financial constraints, PSO has always worked hard to meet the energy needs of the country. However, payments from our customers, especially power entities are required in a streamlined manner so that we may sustain the supply chain and continue imports, she concluded.
