The Pakistan State Oil (PSO) has accused the Pakistan Electric Power Company (Pepco) of failure to execute Fuel Supply Agreements (FSAs) with Genco I and Genco II after a lapse of 14 months. "Till such time as the FSA is executed with Genco I and II, PSO will charge the distribution margin of 3.5 percent, which is in line with FSAs executed with IPPs," PSO Managing Director Irfan K Qureshi said in a letter sent to the Chief of Pepco Rasul Khan Mehsood.
"Every month, PSO retires approximately 15 international Letters of Credit (LCs) and with these huge outstanding amounts it is becoming increasingly difficult to manage imports of furnace oil (FO) whereas local refineries are not supplying petroleum products to PSO on credit," the letter said.
The MD said that "concerned officials of gencos and IPPs may be directed to urgently arrange improvements in decantation infrastructure, operate three shifts for receiving/decanting the products, Genco I and II to execute FSAs with PSO immediately." He also urged for immediate payment of Rs 40 billion to arrange products for peak demand period.
"Furthermore, as per ECC decision, PSO supplied products to all gencos at normal distribution margin of 3.5 percent till the time FSA with Genco III was executed and it was agreed that PSO will charge 2.75 percent distribution margins from Genco III only," PSO MD said, adding that ECC never directed PSO to supply product to gencos at 2.75 percent distribution margins.
"It was requested by Pepco that in the interim period, PSO should supply the product to other gencos in line with terms and conditions of FSA with Genco III and we agreed and supplied the product accordingly," the letter said, adding that after lapse of fourteen months, FSAs with Genco I and II have not been executed with PSO.
In this regard last year a detailed meeting was held between Genco I (Jamshoro) and PSO officials. CEO of Genco I and GM (consumer business) of PSO also attended the meeting. During the meeting, MD Pepco CFO Pepco, GM CEO Genco III along with other finance and legal officials of both organisations agreed on the terms and conditions of FSA of Genco III.
"We are of the opinion that more than 14 months have already been wasted in the execution of FSA with Genco I and II and PSO can not afford to continue supplying product to Genco I and II without FSA on terms and conditions of Genco III," the letter said.
As per ECC decision, PSO started supplies of furnace oil to gencos and IPPs at 25000 tons per day. However, PSO faced decantation problems in winter. "We requested them to improve the decantation infrastructure and operate in three shifts to receive the desired quantities of products," the letter stated adding: "It is regretted that no significant improvements have been made".
"It is feared that we will again have long queues of tank lorries, stranded at various gencos and IPPs for decantation which would badly affect the turnaround time of vehicles thus disrupting our supply chain," the letter says. The ECC approved furnace oil (FO) supplies to gencos without tenders, whereas supplies to all IPPs were made as per FASs except Hubco and Kapco where PSO was requested to extend credit supplies. "Supplies to Lalpir and Pakgen, Japan Power, Southern Electric and other IPPs are made and could only be made after receiving payments under FSA," Qureshi wrote.