ISLAMABAD: With a view to bailing out the financially constrained Pakistan State Oil (PSO), whose credit limit has reached a high risk zone, the Ministry of Petroleum and Natural Resources has decided to change the modality of purchasing furnace oil for the power sector. This will jack up the per unit electricitytariff by 60 paisas, The News has reliably learnt.
When contacted, Dr Asim Hussain, Adviser to PM on Petroleum and Natural Resources, confirmed that his ministry is moving the ECC seeking permission for PSO to float tenders for 120 days on deferred payment as against the existing tenders for 60 days. “This will bail out the PSO that has landed into acute financial constraints.”
According to a summary prepared by the Ministry of Petroleum and Natural Resources, PSO provides furnace oil to the power sector of the country and it is necessary to ensure smooth supply for furnace oil for adequate electricity generation. The government cannot afford to squeeze the fuel supply to power houses impacting electricity generation even if a higher cost has to be paid.
The sources said that President Asif Ali Zardari is very touchy about the loadshedding issue as he deems that if the power outages are perfectly managed with 3,000MW deficit of electricity, then the Pakistan People’s Party can win the general elections otherwise the government will stand nowhere.
So under this scenario, if approved by ECC, furnace oil will be imported under tenders on deferred payment for 120 days. In the summary, the federal government has been asked to provide sovereign guarantees for this purpose in addition to directing the National Bank of Pakistan to further increase the credit limit for PSO.
When it comes to import of furnace oil under tenders on deferred payment for 120 days, the premium will soar because of which the cost of furnace oil will increase by Rs1,500 per tonne and according to Nepra official it will translate into a raise in power tariff by Re0.60 per unit.
The official said that the financial constraints of PSO have increased as its cash flow situation has alarmingly deteriorated that can easily be gauged from the fact that its receivables have swelled to a staggering Rs245.284 billion and payables have surged to Rs172 billion.
Hub Power Company (Hubco) owes Rs110.547 billion to PSO, Wapda Rs62 billion, Kapco Rs37 billion, PIA Rs2.4 billion, OGDCL Rs433 million, KESC 12 billion, NLC Rs342 million, IPPs Rs7.8 billion and Pakistan Railways Rs1.3 billion.
PSO also needs to be paid Rs1.622 billion in the head of price differential claim on high speed diesel, Rs3.407 billion on account of price differential claim on LSFO and HSFO, Rs1.351 billion in the wake of price differential claim on imported PMG and Rs3.909 billion in the head of price deferential claim on GLMP & NTDC and KESC. The PIA also needs to pay Rs1.192 billion as financial charges in the wake of delayed payments.
Sources in the Ministry of Water and Power said that circular debt has, meanwhile, swelled to Rs515 billion just because of slow recovery of the dues of Central Power Purchase Agency (CPPA) which the province and government departments owe to pay. And because of this inefficiency in recovery of bills, the burden of cash flow has increased on PSO manifold.
Coming to the clearance of the liabilities of PSO that have swelled to Rs170 billion, the statement unveils that the public sector oil marketing company owes Rs30.459 billion to Pak-Arab Refinery Company (Parco), Rs17.442 billion to Pakistan Refinery Limited (PRL), Rs9.470 billion to National Refinery Limited (NRL), Rs32.949 billion to Attock Refinery Limited (ARL) and Rs2.593 billion to Bosicar. In addition, the PSO also needs to clear letter of credit payments of Rs84 billion to Kuwait Petroleum Company (KPC) and other fuel oil suppliers.
Dilshad Azeem adds: Amid the piled up circular debt, the receivables of PSO in very first month of the fiscal year 2012-13 have climbed to a record height mainly owed by the power sector.
This sector alone has to pay Rs199.2 billion to the PSO against the furnace oil supply in July 2012, official documents show. Dr Asim Hussain presented detailed figures about the state-run organisation before the Senate Standing Committee on Petroleum and Natural Resources.
The detailed report gives an outlook of both the payables and receivables of the PSO with the public organisations and the federal government also responsible for its (PSO) overall increasing circular debt but after the power sector.
“The power companies remain the centrality of the circular debt despite subsidies provided by the government,” official sources, who handed over the papers, said. They added that the power sector through Pepco got the major amount from the Centre in June when the fiscal year 2011-12 ended but the issue has appeared with more intensity just in the first month of next fiscal, 2012-13.
The Pakistan Railways, PIA, KESC and Oil and Gas Development Corporation collectively have to pay Rs14.5 billion to the PSO.“The accumulative collectables stands at Rs224b just in the first month of the new fiscal.”
At the same time, the PSO has liability of merely Rs90b which it has to pay to the refineries on obtaining the fuel for supplying to the various organisations, according to the papers furnished by the minister before the committee.