The Pakistan State Oil (PSO) on Monday warned that if the problem of circular debt was not taken care of at this stage, it would magnify, making it difficult for all concerned to pay huge amount, mainly accumulated by subsidising POL products, which would further aggravate the energy crisis. The circular debt issue may lead to closure of oil refineries, disrupting the whole fuel supply chain in the country.
This was stated by PSO Managing Director Irfan Qureshi while briefing Senate standing committee on petroleum and natural resources, in a presentation on 'circular debt' The warning came as PSO is facing the worst financial crunch as its receivables against different clients accumulated to over Rs 1.8 billion, hindering operational capabilities of the organisation which was once the lead profit earning entity. Qureshi informed the parliamentary panel that the financial crunch being faced by it due to circular debt might lead PSO to default on its LCs. Resultantly, the suppliers would not be in a position to entertain future supply orders.
"All this is a ringing bell for closure of the refineries if drastic corrective measures are not taken," Qureshi said, adding that "it will disrupt the entire productivity, aggravating the already serious energy crisis in the country". If immediate steps were not taken in time, he added, PSO profitability would further decline due to meagre flow of liquidity, and restoring the entire supply chain would take approximately 4-6 months.
He informed the committee that PSO would stop fuel supply to Pakistan International Airlines (PIA) if it failed to pay its outstanding dues by Tuesday. Seeking 24-hour time from the PSO, a representative of the cash-starved national flag carrier said that Rs 500 million would be paid within the deadline, while clearance of remaining dues would take about six months' time.
The PSO's receivable from different clients' amounts to Rs 108.24 billion on account of fuel supply. The major organisations, which defaulted the company's due payment included Wapda, Hubco, Kapco, PIA, etc, with the amounts of Rs 41.11 billion, Rs 36.41 billion, Rs 16.30 billion, Rs 1.82 billion, and Rs 1.30, billion, respectively.
On the other hand, to justify the term 'circular debt', the PSO has not been far behind any other organisation and has to pay Rs 99.77 billion to local as well as international oil refineries ie Rs 25.88 billion to Parco, Rs 12.55 billion to PRL, Rs 8.66 billion to NRL, Rs 15.66 billion to ARL, Rs 4.68 billion to Bosicor, and Rs 0.52 billion to others.
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