Circular debt in petroleum sector swells to Rs1,601b

ISLAMABAD: The Petroleum Division has prepared a plan to add the fixed rate in gas tariff in a bid to get all state-owned entities in the petroleum sector out of the circular debt that has risen to Rs1,601 billion.

Under the plan, the Petroleum Division has also suggested to earmark some portion of the Petroleum Levy, which is Rs3-5 per litre, to offload the dues of Pakistan State Oil. The fixed rate will be added in gas tariff of Sui Northern and Sui Southern to realise their receivables from the government and other sectors and ensure clearance of their payables, shows the official document available with The News. The Petroleum Division has also asked for issuance of the Sukuk Bond to generate liquidity to cope with the monster of circular debt.

The Economic Coordination Committee (ECC) that meets here today (Wednesday) with Adviser to PM on Finance and Revenue Dr Hafeez Shaikh in the chair will take up the issue.

Since the circular debt in petroleum sector has also alarmingly increased to Rs1,601 billion, posing another challenge to the sitting government, the Petroleum Division has warned the ECC, saying inaction will lead to collapse of its otherwise profitable entities, causing a major disruption in the supply chain.

According to the summary sent to the ECC, many entities in the petroleum sector are on the verge of bankruptcy and they have been over-exposed to loans from the bank to run their operations, but their dues are not being cleared. The adverse impact of circular debt has badly affected the exploration and production activities of the state-owned companies. PSO, Sui Southern and Sui Northern are facing the music because of non recovery of arrears by the power sector.

The amount of circular debt of Rs1,601 billion includes the principal amount of Rs1,080 billion and mark up of Rs520 billion. Out of Rs1,601 billion, the circular debt of PSO (Pakistan State Oil) stands at Rs323 billion, OGDCL (Oil and Gas Development Company Limited) Rs401 billion, GHPL (Government Holding Private Company Limited) Rs113 billion, PPL (Pakistan Petroleum Limited) Rs378 billion, SNGPL (Sui Northern Gas Private Limited) Rs54 billion, SSGCL (Sui Southern Gas Company Limited) Rs293 billion and PLL (Pakistan LNG Limited) Rs39 billion.

The Petroleum Division also suggested settlement of GDS (Gas Development Surcharge) payable by PPL on gas sales to GENCOs against the amount receivables by PPL from SNGPL while SNGPL to set off its receivables from the government on account of GDS against payable by SNGPL to PPL.