The cash-strapped Pakistan State Oil (PSO) has alleged that Independent Power Producers (IPPs) are not following fuel supply agreements (FSA) with respect to payment on account of fuel supply, which was creating hurdles for petroleum products planning and priority allocation, Business Recorder has learnt.
"None of the IPPs is following fuel supply agreements (FSA)/Oil Supply Agreement (OSA) which require advance payment of 7 days for 15 days supplies," Managing Director (MD) PSO Irfan K Qureshi said in a letter to MD Pepco Tahir Basharat Cheema on July 15. "We would also like to draw your attention towards huge receivables of PSO which stand at approximately Rs 125.31 billion," the letter adds.
Another problem arising from the circular debt, the PSO MD wrote, were piecemeal payments from IPPs, including SABA, Kohinoor, Sepcol and Japan, while procuring the product on cash basis. "We also make reference to letter dated July 9, 2010 from CEO Hubco addressed to GM (WPPO) PEPCO which states that total outstanding of Hubco against Pepco is Rs 66.5 billion of which Rs 56.6 billion is payable to PSO," MD PSO said adding that the contents of the letter reflect that no payment is being made to Hubco to clear PSO dues.
In a meeting held on June 14, 2010 with Prime Minister in the chair, PSO was assured the release of Rs 41.5 billion but PSO has received only Rs 31.2 billion as on July 15. "All Gencos are also required to open L/Cs before the beginning of every fortnight, however, we receive repeated partial L/Cs for Genco-111 (TPS-Muzafargarh); and Genco-1 (TPS-Jamshoro) has not opened L/C for the last many months," Qureshi said adding that this is in spite of the fact that PSO has been supplying the product without interruption.
AES is also remitting payments at intervals. "Due to circular debt Parco Refinery has also reduced throughput to a minimum as Parco supplied approximately 16,500 metric tons of furnace oil to PSO whereas PSO supplied 37,400 MT furnace oil to AES," Qureshi said adding that Parco supplies are 44 percent of total supplies to AES whereas historically above 65 percent of product was to be supplied from Parco.
Qureshi said that PSO was being deprived of payment. "PSO has been the most affected party in this situation as not only we have to arrange deficit product by imports, we have been instructed to supply product to major IPPs at the rate of 25,000 MT per day irrespective of non-payment," MD maintained. As a matter of national interest PSO is making all out efforts to supply the product despite product availability constraints from local refineries and arranging import of the products.
MD said that refineries especially Parco should provide full support to cater to deficit dispatches to various locations. "Similarly, Gencos and IPPs should be requested to provide substantial chunk of payment enabling us to ensure uninterrupted supplies," Qureshi added.