PSO fears Rs60bn swell in receivables

KARACHI: Pakistan State Oil (PSO) on Saturday said its receivable could bloat by a staggering Rs50-60 billion in the last quarter of this fiscal year, if subsidy payments hit snags, The News learnt on Saturday.

According to the data shared by the company, during the third quarter of FY2022, PSO’s overdue receivables grew by Rs90 billion on quarter-on-quarter basis to Rs305 billion on account of LNG supplies.

The company officials, however, feared higher receivables on both LNG and oil products -price differential claim (PDC)- might take a toll on PSO’s liquidity in this quarter.

Farhman Mahmood, Head of Research at Sherman Securities, said the government was maintaining prices of oil products to protect consumers by further raising subsidies [paying higher payments on PDCs].

“This will cost the national exchequer Rs60 billion on a fortnightly basis on both petrol and diesel versus Rs45 billion during the previous fortnight, according to our estimates,” he said.

Total subsidy, Mahmood said, had so far reached more than Rs195 billion during Mar-May 2022.

“OMCs have not yet received the full amount for April and May, while the government is eyeing to release some funds to keep supplies intact,” he believed.

The analyst said it was going to have negative implications for OMCs’ liquidity, particularly PSO, which had the largest share of around 50 percent in retail fuel supply in the country.

On the flip side, PSO that enjoys a market share of more than 65 percent in the country’s gas market in terms of value is also likely to take a hit on its costly LNG supplies owing to risks of further accumulation in circular debt.

Mahmood noted that the weighted average price of LNG for May 2022 increased by 40 percent month-on-month (up 60 percent in rupee terms) to $20 per mmbtu, mainly due to higher international prices. On top of that, LNG volumes also grew by 50 percent to meet electricity shortage during summer season as this gas is also used to generate power, he stated.

The government is ready to pay more than $2 billion in subsidies to the oil and power sectors from April to June, which was announced by ousted Prime Minister Imran Khan in his last days in power. Fuel and electricity prices have been the subject of public pressure amid double-digit inflation.