ISLAMABAD: The circular debt of the Pakistan State Oil (PSO) has hit an alarming level as its receivables touched Rs318.9 billion. According to the PSO, the receivable against power sector is piling up to Rs196 billion. The receivable against the PIA and other government entities also recorded at Rs30 billion. Another Rs92.6 billion is receivable from the Sui Northern Gas Pipelines Limited (SNGPL).
In a letter to Asad Hayauddin, secretary petroleum, Ministry of Energy (Petroleum Division), the PSO management said its circular debt touched an alarming level. The PSO has to pay Rs18 billion to the oil refineries.
In a recent development, sources said that the PSO proposed the government to transfer its shares to Mari, the OGDCL and the PPL under an equity swap arrangement. The proposed arrangement would help clear the circular debt of Rs100 billion.
The PSO said that circular debt had financially crippled it for years. Consequently, the company's financing costs had also escalated significantly, with last year's interest payments recorded at Rs15 billion. This chronic situation also adversely affected profitability and hindered infrastructural development investments of the company.
However, it further said that the settlement of circular debt by transfer of these shares would not require the government to arrange any funds, while keeping control of these strategic assets through the PSO. The PSO management is of the view, sources said, that the above market value might not reflect the fair value of those entities.
Therefore, it proposed that the government appoint an independent financial adviser to assess these shares' fair value, and finalise other terms and conditions.
Copyright Business Recorder, 2020
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