ECC approves Rs25bn for LNG, diesel imports

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Friday approved Rs25 billion for the import of Liquefied Natural gas (LNG), diesel and motor sprit to avoid any disruption in supply chain.

“Keeping in mind the prevailing commodity market price trend as well as the need for import of LNG, diesel and motor spirit from March 2022 to June 2022, the ECC approved Rs25 billion as supplementary grant in favour of Petroleum Division to address liquidity constraints to PSO (Pakistan State Oil) for avoiding instant disruption in LNG & Oil supply chain,” a statement post ECC meeting said.

Finance minister Shaukat Tarin presided over a meeting of the ECC. Adviser to PM on commerce and investment Abdul Razak Dawood, federal secretaries, governor SBP, and other senior officials also attended the meeting.

The Petroleum Division in its summary said the supplementary grant would enable PSO to continue to play its pivotal role in the country's energy supply chain.

“PSO’s failure in opening LCs and settling transactions with international players, may result in disruption in fuel supply chain in the country with severe economic impacts,” the summary said.

It said the approval of supplementary grant and release of funds might be made to SNGPL against subsidy, which would remit the same to PSO against latter receivables towards SNGPL for supply of LNG.

SNGPL’s liability to the extent of PSO's LNG receivables would now stand reduced by the amount approved and released as supplementary grant.

PSO being a public sector commercial entity has been performing the responsibility of LNG imports through contracts with international suppliers. It has entered into long-term contracts with renowned entities like Qatargas and Qatar Petroleum. PSO is actually performing as the dedicated trading entity of the government which is bound to take market exposure under the demand from various consumers including power sector, according to the summary.

It said it was a general norm in global commodity transactions, that LNG cargo procurements were LC backed transactions, where credit worthiness of the buyer along with its liquidity status played the defining role in attracting efficiently priced bids. PSO assumes massive commercial exposures despite a legacy of deferred and delayed payments from end users, it said.

Moreover, delayed payments from power sector, subsidised RLNG supplies to zero-rated sector and RLNG diversion to the domestic sector at substantially low prices were the major contributing factors in the accumulation of circular debt and making PSO financially vulnerable, the Petroleum Division summary added. The ECC also passed Rs828 million as supplementary grant for the ministry of Information Technology and Telecommunication for the uplift of the Special Communication Organization.