MoF asked to release Rs 60 billion to PSO

Ministry of Petroleum (MoP) has requested the Ministry of Finance (MoF) to immediately release Rs 60 billion to cash strapped Pakistan State Oil (PSO) to save it from default on payment to fuel suppliers, Business Recorder has learnt. Sources maintained that Ministry of Petroleum had informed Finance Ministry that PSO was on the verge of financial default due to non payment of dues by power sector.
"PSO requires at least Rs 60 billion to clear its dues to local oil refineries and international fuel suppliers to continue smooth fuel supply in the country," sources added. "PSO is facing Letter of Credit (L/C) default for imported products," sources said adding that financial crunch has disrupted supply chain. But in spite of being in such cash strapped position, PSO is making all possible efforts to ensure uninterrupted supplies to power sector and other consumers in the best national interest. Due to huge payables, refineries have also stopped supplying product to PSO on credit.
Pak Arab Refinery Limited (Parco), PSO, Oil and Gas Development Company Limited (OGDCL) and Pakistan Petroleum Limited (PPL) are being adversely affected by circular debt. OGDCL with receivables of over Rs 120 billion failed to announce dividends for the first time and its exploration activities were also being hampered. "The amount under circular debt keeps mounting and PSO is lowest in margins among OMCs due to circular debt issue," PSO official said.
Oil refineries and Oil Marketing Companies (OMCs) have urged the government to implement complete deregulation of the petroleum products in a bid to attract investment. They further argue that government should adopt a sustainable price mechanism for oil refineries as well as OMCs. They are concerned over circular debt issue that has negatively affected the margins in oil sector.
As on April 14, 2011, PSO receivables against different clients were as follows: WAPDA Rs 42.11 billion, Hubco Rs 79.9 billion, Kapco Rs 35.6 billion, PIA Rs 2.033 billion, OGDC Rs 311 million, KESC Rs 3.156 billion, Pakistan Railways Rs 1.102 billion, financial charges from PIA Rs 1.017 billion, price differential claims on High Speed Diesel (HSD) Rs 1.382 billion and on imported PMG Rs 5.417 billion. PSO''s payables stand as: Parco Rs 35.8 billion, PRL Rs 12.7 billion, NRL Rs 9.165 billion, ARL Rs 35.8 billion and Bosicor Rs 4.6 billion.