PSO’s total receivables that stood at Rs73 billion by end of November 2009 have now crossed Rs103 billion. PSO’s payables have also increased to about Rs68.5 billion on February 23. – File Photo.
ISLAMABAD: With receivables of the country’s two largest oil and gas companies
OGDCL and PSO swelling to about Rs175 billion, the Pakistan State Oil has
threatened to discontinue fuel supplies to the two largest independent power
producers and the state-run airline from March 1.
Informed sources told Dawn on Wednesday that PSO had written to Hub Power Company, Kot Addu Thermal Power Company and Pakistan International Airlines that their fuel supplies would be discontinued from March 1 because of non-clearance of their payables.
Unless payments were made, the PSO would not be in a position to honour Rs16.4 billion worth of letters of credit becoming due between now and March 15.
The sources said the PSO’s total receivables that stood at Rs73 billion by end of November 2009 have now crossed Rs103 billion. Power sector companies alone owe over Rs93 billion to the state-run fuel supplier. These include Rs38.7 billion from Pakistan Electric Power Company (Pepco), Rs35.5 billion from Hubco and Rs18.7 billion from Kapco.
Mainly because of huge receivables, the PSO’s payables have also increased to about Rs68.5 billion on February 23. These include Rs35.3 billion due to Parco, Rs14 billion to Pakistan Refinery Limited, Rs15 billion to Attock Oil, Rs8.7 billion to National Refinery and Rs5 billion to Bosicor Refinery.
A finance ministry official said the overall size of inter-corporate debt was still within manageable limits of about Rs130 billion if seen after adjustment of all payables and receivables. He said the situation would improve in the days ahead due to better cash flows of power companies as a result of tariff increase.
He, however, agreed that receivables of some companies had increased significantly and outgoing finance minister Shaukat Tarin would preside over a meeting on Saturday to ensures some payments to PSO.
OGDCL
Likewise, the receivables of Oil and Gas Development Company Limited have also increased to Rs71 billion from about Rs60 billion early this month. Informed sources said the OGDCL board that announced half-yearly profit of about Rs28.5 billion on Wednesday also took up the issue of inter-corporate debt that was hampering its profitability and development projects.
The sources said the OGDCL’s receivables from five oil refineries has now touched Rs38 billion while two gas utilities owe Rs33 billion to the country’s largest oil and gas producer. The board was informed that the company was facing serious liquidity problems due to incorporate circular debt. The board was also told that the company was incurring a loss of Rs5 billion per annum due to enormous receivables.
The board members also informed Secretary Petroleum Kamran Lashari that the company would have to scale down its exploration activities unless its dues were paid. They said the power companies, oil suppliers, gas companies and refineries were able to pass on their receivables to their suppliers, OGDCL was the worst victim of inter-corporate circular debt because it sits at the fag-end of the cash flow chain.
The company announced a profit after tax of Rs28.5 billion for half-yearly period ending December 31 and declared a dividend of Rs1.50 per share for the six months, a statement issued by the company after the board meeting.
The government that had committed with the international lending institutions to eliminate entire circular debt and provide only Rs55 billion on power tariff as subsidy has so far released about Rs23 billion to the power companies on account of power subsidy.
The outgoing finance minister had announced in July this year that circular debt had successfully reduced to Rs70 billion and the rest of the amount would be cleared by December. However, the debt has almost doubled since then.
Mainly because of the circular debt, most of the refineries are running at half their production capacity and resulting in flight of capital for the import of refined products. Also most of the petroleum and power companies are paying heavy debt servicing cost to meet their day-to-day operations.
