Top OMC in economic mess: PSO’s receivables surge to Rs398 billion

ISLAMABAD: The receivables of the Pakistan State Oil (PSO) have gone up to a whooping figure of Rs 398 billion the highest ever in the entity’s history with a major chunk of Rs 192.539 billion from the power sector.

However, the Sui Northern owes Rs 161.025 billion to the PSO in the head of RLNG and the PIA is required to pay Rs 21.979 billion for using jet fuel. The non-recovery of Rs 398 billion receivables has triggered the rise in the cash flow situation, resulting in financial miseries for the state-owned entity.

The worsening cash flow situation has made the PSO highly difficult to time to pay off the amount of Rs 124 billion required to open letter of credits (L/Cs) for the Kuwait Petroleum Company and Standby Letter of Credits (SBLC) for import of LNG. This has also made the PSO unable to pay the amount of Rs 32 billions of 6 refineries.

In the power sector, the power generation companies (GENCOs) and the Central Power Purchase Agency (CPPA) are required to pay Rs 140.886b as of November 15, 2021. The HUBCO owes Rs 43.188 billion and the KAPCO Rs 8.465 billion to the PSO. The inefficient power sector has to pay the huge amount of Rs 74.372 billion in the head of late payment surcharge (LPS) which is not less than a penalty. Owing to the import of RLNG and non-recovery of the cost, the receivables have surged up to Rs 161.025 billion which are due to be paid by the SNGPL.

The worsening exchange rate in the head of import of LNG also caused a loss of Rs 6.585 billion. The data disclosed that the receivables from the PIA have amounted to Rs 21.979 billion.

The PSO is needed to be paid Rs 10.161 billion by the government of Pakistan in the head of price differential claims. The entity has absorbed the loss of Rs 5.300 billion in the wake of exchange rate differential on FE 25 loan. And because of non-payment on time, the late payment surcharge has increased to Rs 7.730 billion. The data also tells about the payables of the PSO to six refineries have increased to Rs 32.101 billion.

The PSO as of November 15, 2021 is required to pay Rs 16.836 billion to the PARCO (Pak Arab Refinery Company), Rs 4.931 billion to the PRL (Pakistan Refinery Limited), Rs 3.984 billion to the NRL (National Refinery Limited), Rs 3.848 billion to the ARL (Attock Refinery Limited), Rs 1.100 billion to the BYCO and Rs 1.403 billion to the ENAR.

The circular debt on account of perpetual injection of costly RLNG into the domestic sector in the last three years has surged to Rs 104 billion and if this time the government again provides RLNG to the domestic sector in Punjab and KP for three months in the coming winter season, it will alarmingly swell to Rs 190 billion.

“The diversion of RLNG to the domestic sector would be a government decision in the coming winter season, which is why the Petroleum Division is making its mind to ask the Finance Division to provide a relief of Rs 50 billion to the PLL and the PSO.

Otherwise, they will go bankrupt because of the zero recovery of RLNG dues from the domestic sector,” a top official at the Energy Ministry told The News.

The diversion of RLNG was started by the government for political considerations in winters of the years 2018-19, 2019-20, 2020-21, causing the buildup of the circular debt of Rs 104 billion.

If the government continues to inject it in the coming winter season, the circular debt in RLNG will worsen and go up to Rs 190 billion. The cost of RLNG has not so far been recovered owing to which the state-owned entities i.e. the Pakistan LNG Limited (PLL) and the Pakistan State Oil (PSO) have started feeling the heat and they are running short of liquidity because of non-recovery of the cost of imported product diverted to the domestic sector.

For the current month of the season, the current RLNG price in the country stands at $15.78 per MMBTU. And if the price of spot cargo ranges between $30 and $35 per MMBTU in the winter season, the PLL is estimated to sustain another dent of Rs 90 billion. The official said RLNG has been defined as an oil product, not gas, and for the OGRA, it is not possible to recover the cost of RLNG from domestic consumers.