With fuel stocks at power houses down to a critical two-day requirement, the country’s largest fuel supplier, Pakistan State Oil (PSO) has faced a total of 9 defaults on international payments because of a serious financial crunch.
An official said diesel consumption dropped by over 7 percent in the last two months, suggesting a lull in economic activity, except the agriculture sector, even though a bumper wheat crop was expected this season. A senior official said a furnace oil shipment due on May 5 was cancelled ad hoc because no bank was ready to issue the letter of credit.
Another ship-load of furnace oil is scheduled to arrive on May 9 following Rs 10 billion disbursed by the federal government on the caretaker prime minister’s orders to ensure uninterrupted supply for the next four days.
“Even though the oil and gas sector receivables against the power sector have exceeded Rs 435 billion we have been strictly instructed to ensure smooth fuel supply for elections,” said a senior petroleum ministry official. “PSO has technically defaulted on international payments 9 times since August 2012,” he said, adding that the bigger challenge is a future default leading to serious complications for the country because PSO handles more than 65 percent of Pakistan’s fuel requirements. Thus, PSO has been forced to increase fuel supply to the power system to 20,000 tonnes per day from 16,000 tonnes per day until Sunday.
The power sector owed Rs 135 billion to PSO and another Rs 300 billion to natural gas companies, an official said on Tuesday. The latest Rs 10 billion disbursements to PSO were overdue in early April, after which fuel supplies worth the same value had been provided to the power sector. While discussing poor recoveries from the power sector, it was learnt that system losses at Sukkur and Hyderabad Electric Power Companies had exceeded 39 and 32 percent respectively, and nobody could question their chief executives because of their close relationship with former ministers of the Pakistan People’s Party (PPP) government. As of May 7, PSO’s total fuel stocks stood at 10 days of requirement that was expected to slightly improve when a fresh shipment arrived on May 9. However, all power stations have an average of two-day of fuel stocks. PSO Spokesperson Maryam Shah said a furnace oil shipment of 70,000 tonnes was due on May 9 which would be sufficient to meet the country’s power requirements for elections. She said the company also had sufficient stocks of diesel and petrol for retail sales to meet market demand for 10-15 days.
She said PSO’s total receivables had exceeded Rs 149.7 billion on May 7, including Rs 139.5 billion against the power sector. Consequently, PSO’s payables to international supplies have exceeded Rs 83 billion and Rs 29 billion to domestic refineries. She also affirmed that no cargo had been cancelled by PSO. However, due to the letter of credit confirmation issue, one furnace oil cargo which had been due on May 5 has been delayed, she said.
She confirmed PSO’s international defaults but said, “Technical issues in the letters of credit resulted in delayed payments to international suppliers.”
“Despite financial constraints, PSO has always worked hard to meet the energy needs of the country. However, payments from our customers, especially power entities are required regularly so that we may sustain the supply chain and continue imports,” she concluded.
