PSO in trouble as power sector stops payments

Our Staff Reporter KARACHI - With total receivables reaching an alarming figure of Rs155 billion, the financial situation of Pakistan State Oil (PSO) has become extremely precarious. The huge outstanding is adversely effecting PSOs liquidity and it may lead to inevitable breakdown in the supply chain resulting in fuel shortages in the country, said a spokesman of PSO here on Monday. Despite severe financial constraints, PSO struggles to live up to its commitment to ensure uninterrupted supplies to the entire country especially the power sector. However, the power sector owes PSO an aggregate amount of approximately Rs131 billion. Of these Hubco owes PSO Rs67 billion, whereas Kapco and Wapda owe Rs35 billion and Rs29 billion respectively. While the national energy company is supplying an average of Rs32 billion worth of fuel to the power sector on a monthly basis, the power sector continuously defaults on its payment obligations to PSO. This month the power sector gave paltry Rs8.5 billion as payment for the fuel oil supplied to them. In the recent past, the company has sent out requests for payments to the power entities including Hubco, Kapco and Wapda, however, no substantial payment has been released in September 2011. The continuous non-payment of power sector has made PSO severely cash strapped. As a result, the company has defaulted on local refineries payments this month which has adversely affected the local production. Furthermore, the company is constantly struggling to meet the international payment obligations as any default on the part of PSO to its international suppliers would disrupt supplies and the resumption of which would take months. In case timely payments are not received from the power sector in the near future, fuel cargoes will have to be deferred as PSO has exhausted its resources for financing future product supplies. With domestic production of fuel oil already in doldrums, a reduction in import would result in shortage of fuel and increased loadshedding nation wide. Pakistan State Oil, as the largest energy company in the country is cognizant of its responsibilities and continues to try and meet the daunting energy needs of the nation in a responsible and timely manner. However, given the critical level of the circular debt and mounting receivables, living up to the credo of PSO never stops is a challenge on its own.

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