PSO threatens to stop oil imports

The PSO's total receivables have surged to a record Rs160 billion.—File photo

 

ISLAMABAD: With its receivables touching a record Rs160 billion, the Pakistan State Oil (PSO) on Tuesday informed the government that it had decided to defer oil imports for a week and to cancel import orders 'in the pipeline' within a week unless it was paid a minimum of Rs40 billion upfront.

An 'emergency support' of Rs40 billion from the federal government would only help PSO to avert default on international payments, but it will still need more money to meet the fuel requirement for power generation to avert a more serious power crisis in winter months.


The largest oil supplier has already stopped fuel supplies to Kot Addu Thermal Company on credit and plans to suspend supplies to Hubco and Wapda's power plants on Wednesday.

"A decision to award tenders for HSFO and LSFO (High sulphur and lower sulphur furnace oil) for the period Nov-Dec 2010 have also been deferred for one week on October 29. Supplies to Hubco and Pepco stations will be discontinued from November 3, because of non-payment of outstanding receivables which stand at Rs158.647 billion," PSO's managing director Irfan K. Qureshi said in a 'most urgent letter' to the ministers for petroleum, finance and water and power on Tuesday.

The company said its receivables from Wapda stood at Rs54.3 billion, Rs66.7 billion from Hubco, Rs31 billion from Kapco and about Rs5.5 billion from KESC and it was already facing a day to day default situation in expiring international letters of credit.

Because of the current receivable position, it said, it had become impossible to make import payments.
In the absence of an urgent financial relief from the government and Pepco, he said, the PSO would be forced to cancel the planned HSFO and LSFO imports which would disrupt the fuel supply chain of the country resulting in a severe energy crisis.

"In the wake of huge outstanding, the PSO has not been able to develop substantial infrastructure and planning of imports and inventory management is stalled," the PSO managing director said in a separate letter.

He said that PSO's financial constraints had aggravated to such a level that it had become impossible for the company to continue supplies to the power sector on credit.

As the company moves to clear dues of refineries, it becomes impossible for the PSO to import furnace oil.
The largest fuel supplier has also requested the ministers for water and power and finance to advise Hubco, Kapco and Wapda to immediately make payments along with financial charges to PSO.

The PSO's total receivables have surged to a record Rs160 billion despite payment of about Rs40 billion made in September when its receivables stood at about Rs149 billion.

The major reason for the debt is the non-payment of dues by the power sector companies both in the public and private sector.

Earlier, the federal government had asked the PSO to import about 500,000 – 600,000 tons of furnace oil a month to meet the increased sector demand because of expected reduction in hydropower generation.

Pakistan consumes about 900,000 tons of furnace oil per month, of which about 300,000 tons are provided by local refineries.

The remaining 600,000 tons are imported mostly by the PSO to meet the power sector requirement that substantially goes up in extreme winter because of low hydropower production and also in extreme summer because of higher electricity demand.