PSO edging closer to financial collapse
Ibn-e-Ameer
It is poor management, inefficiency, or government intervention; whatever you call it, Pakistan State Oil (PSO) is edging towards financial collapse due to circular debt.
PSO Pakistan is the country’s largest oil marketing company–an organization that government owns. It claims to capture a 46.3% market share in FY21 against 44.3% in FY20, leading to financial collapse. The circular debt is haunting PSO which receivables touch the highest ever mark.
It also announced a record-breaking gross revenue of PKR 1.4 trillion with the highest ever profit after tax amounting to Rs 29.1 billion for 2020-21 (FY21).
The company faced Rs 6.5 billion loss after tax in the preceding year.
Read More: PSO happy to shelving oil deal with Pakistan Railway
Its net profit caused earning per share of Rs 62.07.PSO recorded a loss per share of Rs 13.77 in FY20.
Despite all tall claims of the highest ever record profit, the challenges of circular debt continue to haunt PSO management.
The management of PSO fails to recover dues from its clients that have touched the historical mark of Rs 370 billion for the first time in history.
Though it has a new Chief Financial Officer (CFO), Ms. Gulzar Khoja, it also seems a tough challenge for PSO’s new CFO as the dues continue ballooning and reached the highest ever.
Chronic Defaulters of PSO
The power sector is a significant defaulter of PSO that pays over Rs 190 billion to the state-run oil marketing company.
Geckos have defaulted on around Rs 140 billion to PSO. The government owns these Gencos that consume furnace oil to produce electricity.
The other defaulters are two IPPs that are to make payments of over Rs 49 billion.
Read More: PSO recorded highest oil sales during FY21
Hubco is to pay Rs 41 billion, whereas Kapco is to clear dues of Rs 8 billion. Gencos and these two IPPs are chronic defaulters of PSO.
SNGPL
The Sui Northern Gas Pipeline Limited (SNGPL) has emerged as another big defaulter of PSO.
Pakistan State Oil (PSO) imports 500 mmcfd LNG from Qatar and arranges one more cargo on spot purchases.
It supplies onward to SNGPL to distribute and market to the consumers of gas.
However, SNGPL has been unable to recover the vast gas bills from the consumers because of the supply of LNG in the winter seasons.
The federal government had directed SNGPL to supply LNG to domestic consumers in the winter season to overcome the gas crisis.
However, it causes a considerable cost to the SNPGL to recover over Rs 100 billion from the domestic consumers.
At present, there is no legal mechanism in place to recover the LNG price from domestic consumers. Resultantly, SNGPL has to rescue a considerable stuck amount from domestic consumers.
As a result, SNGPL has also refused to pay the LNG bill to PSO that continues to swell with time.
PSO is to recover around Rs 142 billion on account of LNG supply from SNPGL. It has shifted a burden of debt on the PSO Pakistan.
In addition, PSO has booked Rs 5.15 billion exchange gains it occurred on LNG import. It wants to recover from the SNGPL.
PIA
PIA is another chronic defaulter of Pakistan State Oil. The oil marketing company supplies jet fuel to PIA to fly its airlines.
The national carrier has also become a sick unit of Pakistan that is running into multibillion rupees loss.
Subsequently, it does not pay dues to PSO. The company has booked over Rs 21 billion against PIA.
PSO has also booked another Rs 9.28 billion from differential claims from the government and a Rs 1.95 billion exchange rate differential on FE 25 loan.
Payment to refineries
PSO also lifts petroleum products from local oil refineries. It has to pay Rs 23 billion to local refineries-Parco Rs 12.8b, PRL Rs 4.6b, NRL Rs 675 million, ARL Rs 3.5b, Byco Rs143m and ENAR Rs 1.24b.
Read More: LNG pushes SNGPL, PSO, PLL into Rs 358b debt trap
PSO also has an oil supply agreement with Kuwait state-run company Kuwait Petroleum. Additionally, it also imports fuel through spot purchases. It has to pay Rs 157 billion to Kuwait Petroleum and Qatar, including spot purchases on LNG imports to clear L/Cs payments.
PSO Petrol Pump
It is the largest oil marketing company in Pakistan with the highest market share compared to other oil marketing companies.
Therefore, it has the largest retail network of petrol pumps that are around 3400 across the country.
PSO Card
Its direct sale is also through cards.
It is a digital solution to pay fuel bills to Petrol pumps in Pakistan through cards. These are chip-based cards for every consumer. They are EMV compliant fuel cards to enable the consumers to manage fuel efficiently.
Vision of PSO
Despite all challenges and failures, PSO management has high morale to run the wheels of the nation’s economy.
PSO is a strategic company for Pakistan that had stepped in to counter the oil crisis when other oil marketing companies left the government high and dry.
This company has also entered into the LNG market that fueled the economy by addressing a gas crisis.
Since the government came into power, the country has not faced a gas crisis at a high price.
