As the New Year unfurls itself, Pakistan State Oil (PSO) finds itself ensnared in a formidable conundrum — a burgeoning pile of customer receivables amounting to a staggering Rs 853 billion, juxtaposed with a daunting Rs 142 billion of payables it has accrued with its suppliers. Among the latter, PSO was indebted to four different refineries for Rs 37 billion — a sum that has surpassed its due date. This was the most acute crisis the company had ever faced, and that too within a year after PSO had received a lifeline of Rs 27 billion from the Government of Pakistan in March 2023.
It is crucial to note that we have made concerted efforts to solicit a response from PSO, to which they have agreed, but have yet to deliver. It is equally crucial to underscore that accounts payable and accounts receivable are two facets of the same financial prism. While accounts payable represent the funds your business owes to suppliers, accounts receivable encapsulate the money owed to your business by its customers.
PSO is not required to amass the entirety of the Rs 853 billion to settle the Rs 142 billion. The specifics of PSO’s cash flows remain elusive as the company has not filed its financials beyond September 30, 2023. However, PSO does have recourse to both syndicated loan facilities and periodic financial injections from the Government of Pakistan. Now, let’s delve into the numbers.
Turning our attention to the receivables, the primary debtor of PSO is Sui Northern Gas Pipeline (SNGPL), with outstanding dues amounting to Rs 571 billion, of which Rs 375 billion is overdue. The power sector of Pakistan owes PSO Rs 187 billion, with state-owned generation companies and the Hub Power Company (HUBCO) responsible for Rs 72 billion and Rs 18 billion respectively.
The Government of Pakistan and Pakistan International Airlines (PIA) also feature on the list, with the former owing PSO Rs 66 billion and the latter Rs 28 billion.
On the flip side, PSO’s payables are categorised into two types: those owed to local refineries and those to international suppliers.
On the domestic front, PSO owes Rs 22 billion to Pak Arab Refinery (PARCO), Rs 8 billion to Pakistan Refinery (PRL), and Rs 7 billion to Attock Refinery (ARL) — all of which are overdue. PSO also owes Rs 585 million to the ENAR Petroleum Refining Facility in Karachi. One of the aforementioned refineries has reportedly taken umbrage at PSO’s delayed payments and, according to our anonymous sources, has suspended its jet fuel supplies to PSO.
If accurate, the cessation of jet fuel supplies could have immediate repercussions, as the jet fuel stocks at airports in Lahore, Faisalabad, and Multan are anticipated to require replenishment. We have endeavoured to contact the refinery in question, but no response has been forthcoming.
Externally, PSO’s predicament is at its most critical. The company’s cumulative payables to the Kuwait Petroleum Corporation (KPC) and its standby letters of credit for liquified natural gas payments amount to Rs 141 billion. According to sources, this is the payment that PSO has urged the government to prioritise in terms of assistance.