Power outages to worsen after fuel crisis

ISLAMABAD: In the wake of the ongoing petrol crisis, the Ministry of Petroleum has told the Ministry of Water and Power in clear terms that it will have to first pay to get the furnace oil required to generate electricity.
Furnace oil stocks used by power houses for electricity generation are fast drying up, threatening to worsen the power crisis in the country. PSO has formally informed the government that it is unable to import fuel cargoes and continue supplies to the power sector because of late payments.
The Pakistan State Oil (PSO) has informed the quarters concerned that its furnace oil stocks have dried up and it is unable to import the commodity due to the liquidity crunch.An official said the top mandarins of the Ministry of Water and Power and Ministry of Petroleum and Natural Resources met at the Finance Ministry on Tuesday where it was decided that the government will not ask PSO to arrange furnace oil on its own, as the entity had defaulted on Rs50 billion of six local banks and L/Cs of Rs46 billion.
The government will now first provide finances to PSO and then ask it to import furnace oil.The power sector owes Rs176 billion to PSO while its receivables have surged to over Rs200 billion.
Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said: “We have asked the Ministry of Finance and the Ministry of Water and Power to first pay and then import furnace oil. The Ministry of Finance has decided to pay Rs27 billion to PSO for the import of 18,000 tons of furnace oil against the L/C for one month.
“Now in future, PSO will be provided with liquidity after which the entity will import furnace oil,” the minister said.Abbasi said PSO needed Rs27 billion every month to ensure the supply of furnace oil and the Ministry of Finance and Ministry of Water and Power will have to ensure the required payment to PSO.
The minister also said Hubco power house will get furnace oil from Byco as both were situated in Hub, Balochistan. However, for Kapco (Kot Addu Power Company), two vessels carrying LSFO are going to arrive at the Karachi Port while LSFO will be provided to Kapco for power generation.
In the current month, no cargo of furnace oil was imported and only one consignment arrived in December. “Unless the power sectorclears its dues, we will not be able to import furnace oil and diesel in the country,” the PSO management told the top mandarins in Islamabad.
The PSO dues have surged up to Rs200 billion out of which Rs176 billion are owed by the power sector.On an average, PSO imports 3-4 cargoes of furnace oil (of 65,000 MTs each) per month. The authorities in Islamabad are unmoved and instead of making concentrated efforts to get the major release from the Ministry of Finance and Ministry of Water and Power for unblocking the L/Cs required to import furnace oil have asked Byco under ordinary arrangements to provide furnace oil to run the Hubco power house. Also Pak-Arab Refinery Company (PARCO) has been told to provide furnace oil to Kapco and the government seemed to be least interested in paying PSO dues.
Wapda owes Rs99.3 billion to PSO, Hubco Rs58 billion, Kapco Rs13.6 billion, KESC Rs3.8 billion, and Saba Power and Southern Electric Rs579 million.
On top of that, PIA has to pay Rs14 billion as of Tuesday, Pakistan Railways Rs830 million, National Logistics Cell (NLC) Rs279 million and OGDCL 180 million.To a question, the official said in the deal with Byco and Parco for furnace oil for the power sector, PSO had been used by the government as the middle man.
The official said as PSO is out of furnace oil stock, the government has issued directives that Hubco will now purchase furnace oil from Byco on advance payment, with PSO being the middle man.
On receipt of payment, Byco will release furnace oil for onward supply to Hubco. This arrangement will no longer sustain and the power crisis is feared to worsen.
Default on payment for furnace oil L/Cs has also impacted PSO’s ability to import white oil products, including petrol, as the company is unable to open further L/Cs until clearance of the current outstanding dues.
The official said on an average, PSO imports four cargoes of MOGAS (petrol) of 50,000 MTs each per month. Only one cargo of MOGAS was imported on 15th January with another cargo expected to be imported at the end of the current month.
The PSO defaulted on payment of Rs46 billion against the L/Cs which resulted in the company’s credit lines and overdraft limits being exhausted. Consequently, the banks cut its credit lines meaning that the company is no longer able to open any further L/C.