Pakistan State Oil (PSO) has the permission from the government to stop furnace oil supply to Pakistan Electric Power Company (Pepco) and Hub Power Company (Hubco) after their receivables touch Rs 22.87 billion, sources in Petroleum Ministry told Business Recorder.
They said that total receivables against Pepco are Rs 11.58 billion whereas Hubco is defaulter of Rs 11.29 billion. PSO, through its various earlier communications, has kept all stakeholders, including the Secretary Petroleum, apprised of the mounting receivables due from Pepco and Hubco, but no effort has been made to resolve this issue, sources said.
With no foreseeable solution, PSO being a commercial organisation, can not continue to bear the brunt of liquidity problem faced by Pepco and Hubco as it, in turn, severely affects its commercial operations and put it at substantial financial risk besides the huge financial constraints, sources added.
They said that receivables problem has become even more critical in the case of Hubco as supplies have exceeded allowable credit limit against LC (Rs 7.28 billion) by Rs 4.01billion, that is unsecured credit, which invites serious objections from external auditors and shareholders.
They said that despite serious defaults on payment by Hubco and Pepco, PSO at the advice of Petroleum Ministry has been mitigating the situation so far, but now it is apparent that further fuel supplies to these entities would adversely be affecting its financials, which could lead to a heavy toll on its daily operations including financial management.
PSO, in a letter written to the Petroleum Secretary on July 11, had requested that the issue should be taken up with the Ministries of Water and Power and Finance and, if they do not help, the company should be allowed to work on commercial basis and be authorised to suspend furnace oil supply to Pepco and Hubco. PSO is also of the view that it being a listed company on KSE is expected to strictly comply with good corporate governance rules.