Liquidity position of Pakistan State Oil (PSO) has further worsened as banks have imposed Rs 60 billion heavy penalty on state-owned oil giant (PSO) over delay in clearing the outstanding payments worth billions of rupees.
According to the details of Rs 60 billion penalty on account of late payment charges (LPS), GENCOs have caused Rs 27.9 billion, HUBCO Rs 19 b, while Rs 12.9b due to KAPCO and Rs 0.1b penalty was because of K-Electric.
“PSO has suffered heavy penalty under the head LPS mainly due to delay in payments by the government organizations”, sources said, adding,” This additional burden of Rs 60 billion penalty on PSO will, however, be paid by the national exchequer.”
Available documents disclosed that the oil giant has so far exhausted all its financing resources and is now significantly constrained to make payments from future imports or establish LC (letter of credit). Default amount under seven (7) days credit arrangement currently in practice has gone up to Rs 29 billion and increasing. Release of funds from the government or from PEPCO collection has been negligible and contributing to increasing deficit. As a result, as of January 25, 2017 total receivable balance of PSO is Rs 269 billion (including FO, LNG, PDC & Late Payment Charges of Rs 60 billion).
Also, the liquidity position of the oil giant is expected to worsen further, as PSO has exceeded its bank borrowings by Rs 9 billion and in the next 10 days PSO needs to make further payments of Rs 25 billion against international LCs, falling with default is imminent.
The state-owned oil giant has sent an SOS message to the petroleum, finance, and water and power ministries, seeking a swift release of money.
Documents further revealed that PSO has incurred interest of Rs 7.2 billion in 2015-16 and Rs 3 billion in first half of 2017, which is further impacting the cash flows of the organization. The amount to be reimbursed at the earliest by the Ministry of Water & Power, documents said.
PSO Managing Director Sheikh Imranul Haque, in a letter to Secretary, Ministry of Water & Power, has requested support and urgent attention. The MD has asked the government to clear growing receivables and arrange overdue balance of Rs 48 billion to PSO for LNG, FO and PIA and simultaneously arrange schedule for payment of remaining balance, failing which we foresee supply chain disruption and repercussions in the country due to stock out and nonpayment to Pakistan Railways and refineries.
Sources in Power Ministry said the Finance Ministry has been causing undue delay in clearing the outstanding payments of PSO, while Rs 70 billion it earned from the power consumers during the last financial year under the heads equalization tariff and financial cost. And, total Rs 70 billion were collected from the power consumers. “The government has already been heavily charging the power consumers under the heads equalization tariff and financial cost, while finance ministry is using delaying tactics in clearing the burgeoning dues of PSO,” sources said.
It is worth mentioning here that PSO used to borrow from banks for opening the LCs. And, the banks imposed penalty under the head LPS over late payments. PSO has suffered Rs 60 billion penalty due to increasing receivables/circular debt of the power sector. And, this is largely because of mismanagement of resources by the ministry of finance as PSO faces threats of default again.
