Managing Director, Pakistan State Oil (PSO), Sheikh Imranul Haque, has sought advance payment plan of Rs 35 billion per month from Power Division to ensure supply of 18,000 tons per day to sustain generation from April to September 2018, official sources told Business Recorder.
In a recent letter to Minister for Power Division, he said that receivables of Rs 284 billion against the power sector and Rs 48 billion against SNGPL, PIA and price differential claims, have to be reduced for PSO not to become another PSM or PIA as decline in PSO''s profitability will only facilitate the increasing number of OMC''s to benefit at the expense of PSO.
The Finance Division has released Rs 53 billion to the energy sector including PSO against approved amount of Rs 80 billion. The payment is subject to pre-audit of invoices of IPPs and other companies, which may take more time to clear their liabilities.
The Cabinet Committee on Energy (CCoE), on June 6, 2017 directed to obtain prior approval of the CCoE for the procurement of RFO for the power sector. Consequently, Petroleum Division was requested to obtain approval of the CCoE for the import of the RFO to the tune of 18000 MT/day in order to sustain generation during summer, excluding supply from local refineries.
Power Division in a summary to the CCoE, has indicated that based on factors like analysis of demand and associated generation to meet that demand, delayed Commercial Operation Date (CoD) of three major RLNG plants, delayed CoD of new hydel generation plants and scheduled outages of existing power plants, operation of RFO based power plants may be required to meet the demand (peak and off peak)). Local refineries according to the information shared during the CCoE meeting, are providing on average, about 10,000 MT/day of RFO for power generation.
Petroleum Division, however, in response advised to obtain approval of the CCoE besides plant wise RFO demand to PSO at least 60-75 days in advance so that PSO may start procurement process of RFO import. Accordingly, it is estimated that fuel oil required from April to September 2018 will approximately be 24,000 MT/day.
Power Division has pleaded that since local refineries do not have the capacity to meet the entire RFO requirements of power sector and 60 days reserve of RFO is to be maintained at peak generation level during the period, import of RFO will be required to maintain a fuel supply to the tune of 18000 MT/day to sustain generation during summer, excluding supply from local refineries.
Managing Director PSO, in his letter, further stated that the framework of circular debt resettlement plan is a first step by ECC to settle power-sector payables and to ensure that government-owned companies PSO, SSGC, SNGPL, GENCOS, DISCOs and nuclear power plants continue to operate normally.
According to him, proposed allocation of Rs 15-20 billion will merely cover around 5% of PSO''s debt and is certainly going to defeat GoP''s intention to operate the organization effectively and efficiently. There is also no consideration of the interest cost being incurred by PSO (Rs 7 billion per annum) to manage the LNG and fuel supplies and surprisingly a significant chunk is earmarked for debt servicing and interest payments of PHPL and for capacity payments to the power sector.
"Unlike other OMCs, PSO is burdened to ensure the operation of national oil refineries, PIA and power plants running on both fuel oil and RLNG and yet for years, PSO has not been prioritized in the settlement of the circular debt despite repeated representations; and yet PSO is driving energy supply chain and economy as aptly depicted for the current fiscal year from July 2017 to February 2018," he continued.
PSO further argued that various committees assigned the responsibility by ECC and CCOE over the last 4/6 months have not defined a road map for circular debt settlement and no plans have been shared with PSO.
"If there is any need to import furnace oil this summer, the Ministry of Energy will need to provide a payment/financing plan eg 20,000 tons per day supplies requires payment of Rs 35 billion per month and such supplies are not financeable by PSO given our choked credit lines of Rs 75 billion and Foreign Exchange (FE) loans of Rs 84 billion.
Already GENCOs and KE are directly requesting supplies from PSO and not through MoE (Power Division) and PSO is not in a position to accede to their request unless approved by CCoE.
Managing Director PSO believes that circular debt situation would worsen and PSO will continue to suffer unless its debt burden of Rs 332 billion is settled through a comprehensive plan that also removes structural challenges.
He said that the decision of the committee of Secretary, Petroleum & Power to pay for LNG within 10 days of discharge and arrange advance payment equivalent to 6 cargoes ($ 200m) has not been provided whereas the PLL was issued sovereign guarantees to issue LCs and SBLC. The PSO has ensured uninterrupted supplies from its own resources despite payments after 45 days (and not 10 days) and as a result interest cost of Rs 196 million to date in FY 2018 only has been incurred by PSO.
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