Oil and Gas Development Company Limited (OGDCL), has sought help of Petroleum Division for settlement of a portion of its overdue receivables of Rs 350 billion from the long due Sukuk of Rs 200 billion meant to clear a portion of circular debt, sources close to Prime Minister's Special Assistant on Petroleum told Business Recorder.
The country's circular debt has reached the highest level of Rs 1.7 trillion despite the claims of the incumbent government that it reduced growth of circular debt from Rs 39 billion to Rs 20 billion per month.
The government is expecting that Sukuks worth Rs 200 billion will be issued by the end of current month or before the arrival of IMF team next month.
The government has also shared an ambitious circular debt retirement plan with the International Monetary Fund (IMF), according to which circular debt will be reduced from Rs 465 billion (2018-19 ) to Rs 75 billion (2022-23) per annum.
CD plan assumes: (i) improving power distribution collection in selected Distribution Companies (Discos) annually in the range of 3 per cent to 5 per cent that will reduce circular debt flows by Rs 334 billion over the plan period (FY 2020-FY 2023); (ii) five Discos to achieve 100 per cent collection over the plan period; (iii) reducing line losses in selected Discos annually by approximately 1 per cent that will provide fiscal space of Rs 118 billion over the plan period; (iv) annual projected generation and sales of Rs 136 GWh and 111 GWh respectively by FY 2022-2023; (v) rationalization of subsidy allocations to bring it to a previous agreed level of 0.4 per cent of GDP from existing level of 0.6 per cent of GDP; (vi) annual reduction of running and permanent defaulters by Rs 78 billion; and (vii) reducing power sector annual flows to less than Rs 75 billion per annum (FY 2022-2023) from the level of Rs 465 billion per annum (FY 2018-19).
OGDCL's top brass, in its letter to the Petroleum Division hoped that the Government of Pakistan is considering issuing Sukuk of Rs 200 billion towards adjustment of the prevailing circular debt in the country.
In this context, following few facts with respect to OGDCL have been placed before the government's consideration leading to an appropriate relief that is now crucial for running the affairs of the company and to safeguard interest of the shareholders.
According to the OGDCL, current balance of the its overdue receivables have risen to an alarming level of Rs 350 billion. In addition to this amount, Late Payment Surcharge (LPS) of Rs 138 billion is also due. Major contributors to the build-up of OGDCL's circular debt are SSGCL, SNGPL, Uch Power Plants and Power Holding Pvt. Ltd(PHPL) with the following statistics: (i) SSGCL - overdue amount, Rs 116.410 billion- LPS Rs 44 billion (total Rs 160.41 billion);(ii) SNGPL- over due Rs 90 billion, LPS Rs 14.282 billion( total Rs 104.282 billion) ;(iii) Uch Power Plants- overdue Rs 24.620 billion, LPS, Rs 2.880 billion (total Rs 27.500 billion);(iv) refineries- over due Rs 2.957 billion , LPS 24.307 billion (total Rs 27.742 billion);(v) PHPL- Rs 115.622 billion, LPS, Rs 52.018 billion (total Rs 167.640 billion). This shows that the stock of total OGDCL's receivables stands at Rs 487.4 billion including overdue and LPS amount.
OGDCL argues that effects of these huge overdue stuck-up receivables on operations and plants of the company as well as on its ability to discharge its statutory obligations cannot be over emphasized.
The company further maintains that being at the end of the whole chain of the circular debt it cannot compensate its financial burden by holding its liabilities towards creditors as is the case with cost of the other organisations (gas companies, refineries and power producers etc).
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