ECC approves Rs 25b grant for cash starved PSO

Ibn-e-Ameer

Islamabad: Economic Coordination Committee (ECC) on Friday approved Rs 25 billion grant for Pakistan State Oil (PSO) to address its financial constraints in wake of higher oil prices in the global market.

The management of Pakistan State Oil (PSO) has already broken all its previous records of circular debt which crossed the Rs 500 billion mark.

The company management has failed to control the swelling circular debt which made a new record of 500.9 billion for the first time in history.

The company is struggling to curtail it. But circular debt continues rising due to defaulters.

Now, PSO is facing a historical liquidity crunch that is leading the state-run entity towards financial default due to rising circular debt.

PSO is a state-run oil marketing company (OMC) that controls major shares of oil supply in the country.

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It continues registering profits that reported an all-time high net profit after tax.

PSO made a profit of Rs 11.9 billion in the first quarter of the fiscal year 2021-22 (Q1FY22).

It recorded a growth of 133% compared to the same period last year. Its profit is due to soaring oil prices globally that had also affected the domestic oil prices.

PSO had not seen a major increase in market share.

Its profit was owing to inventory gains that led to its higher profitability in wake of rising oil prices. The power sector was a key defaulter of PSO that is to pay Rs 167.7 billion to the company on account of oil supply.

Gencos are to pay Rs 140.8 billion that is contributing to the circular debt of PSO.

Other Independent Power Plants (IPPs)-Hubco and Kapco are also defaulters of the PSO.

Hub power company (Hubco) has emerged as a chronic defaulter of PSO which is to pay Rs 21.7 billion. Earlier, the government had made payment to Hubco which had made payment onward to PSO.

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Now, its dues against PSO have again started rising that had touched the Rs 43.18 billion mark. Kapco is another defaulter that is to pay Rs 5.16 billion to PSO on account of fuel supply.

SNGPL

PSO imports LNG from Qatar and supplies it to SNGPL onward to distribute to the customers.

But, SNGPL has emerged as another defaulter in LNG that is to pay Rs 272 billion to PSO. However, SNGPL claims that it had to receive over Rs 100 billion from domestic gas consumers.

It had diverted imported gas to domestic consumers following the direction of the government to overcome the gas crisis.

But, it had resulted in piling up dues of over Rs 100 billion from domestic consumers.

There is no legal mechanism in place to recover this amount from the consumers. This is why these dues have been stuck. Therefore, SNGPL is not paying dues to the PSO.

Receivables from PIA & GOP

PSO is to receive Rs 22.4 billion from Pakistan International Airlines (PIA) and the government of Pakistan.

It supplies jet fuel to PIA to run the national carrier. However, PIA has been unable to pay Rs 22.4 billion to PSO.

Government is to pay Rs 20 billion on account of price differential claims including Rs 12 billion in financial year 2022. The company is also to receive Rs 33 billion to oil refineries on account of fuel supply.