The Pakistan State Oil (PSO) has expressed inability to meet furnace oil requirements of public sector thermal power plants because of its worsening financial position, official sources told Business Recorder here on Tuesday.
"PSO is not under any contractual obligation to meet the entire demand of the generation companies, but would continue to participate in tenders in future, keeping in view its own financial position," sources quoted Kalim Siddiqui, Executive Director, PSO Customer Services, as stating in a letter to the federal government.
The state-owned oil supplier has claimed that it would always provide all-out support to Pepco by offering maximum furnace oil supplies against fortnightly demand. "We have supplied almost 66 percent, or 667,000 tons, of total requirement of thermal power station (TPS) at Muzzafargarh in the first fortnight of June, which was significantly higher than any other OMC participating in the tenders," sources quoted Siddiqui as saying.
"However, PSO has to inform regretfully that insufficient payments at a staggered pace from Pepco against furnace oil supplies have reached Rs 12.980 billion, of which Rs 8.043 billion was overdue amount, Rs 3.622 due from July 1 and Rs 1.315 billion against furnace oil supplied from 16 to 24 June." Pakistan Electric Power Company (Pepco) was responsible for clearing the payments of the state-owned oil supplier, but failed to honour the commitments due to one reason or another, sources added.
Pepco further aggravated the situation by writing a letter to the Additional Secretary, Petroleum, putting responsibility of delay in supply of furnace oil on the shoulders of PSO, sources said. Despite bad experience of payment, PSO participated in the tender in the second fortnight of June, albeit for a limited quantity, due to financial constraints arising from the existing situation, sources added.
The company, however, also declined to ignore late payment surcharge, saying that financial charges on delayed payment from Pepco could not be waived off as it would erode PSO''s earnings and render its overall business unfeasible. Sources said that PSO had suspended supplies to Hub Power Company (Hubco) but resumed it on the instructions of Secretary Petroleum, Zafar Mahmood a couple of weeks ago.
The company, in its letter on June 16 had informed the ministry that it was due to non-payment from Hubco, with the outstanding amount up from Rs 4.5 billion to around Rs 6 billion, sources said.
PSO had also requested the Secretary Petroleum to make arrangements for immediate clearance of the outstanding amount and a letter of assurance against all unsecured supplies, which currently was Rs 1.19 billion, may be awarded so as to enable the company to continue furnace oil supplies to Hubco complex.
The two letters written by PSO management showed that it was treating private and public sector thermal power stations differently. On the one hand, it clearly conveyed to Pepco that it was unable to meet the entire furnace oil requirements of thermal power plants but, on the other, it expressed willingness to supply furnace oil to Hubco.