ISLAMABAD: While claiming it is on the brink of collapse, Pakistan State Oil (PSO), state-owned energy marketing company, has submitted “cash arrangement formula” to the government including imposition of Rs 10/ litre levy on sale of Mogas (petrol) and HSD with an impact of Rs 100 billion to be paid to it against LNG to avoid imminent default, sources close to Minister of State for Petroleum told Business Recorder.

PSO’s Managing Director, sources said, has highlighted financial affairs of his company days before approval of Rs 50 billion by the Economic Coordination Committee (ECC) of the Cabinet. He made it clear that PSO may not be able to meet its payment obligations in terms of refineries, imports and taxes from March 14, 2023.

PSO has been maintaining the country’s supply chain despite galloping receivables and ensuing challenges. PSO’s receivables have now reached a whopping level of Rs762 billion since June 30, 2022, of this Rs 598.586 billion is the principal whereas Rs 163.570 billion is LPS.

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Receivables from SNGPL currently stand at Rs 494 billion and are a major contributor to the worsening liquidity position of PSO. Of Rs 494 billion, principal outstanding receivables as on June 30, 2022 were Rs 292.3 billion. Shortfall during last summer (July 22-October 2022) was Rs 32.2 billion whereas shortfall figure during winter (November 22 to February 2023) was Rs 105.6 billion.

This indicates that outstanding receivables as on February 7, 2023 were 430.1 billion; however, after addition of Late Payment surcharge (LPS) of Rs 64.1 billion, total receivables stood at Rs 494.2 billion.

PSO argues that to bridge this deficit, it availed Rs 100 billion additional borrowings from banks against the GoP guarantee. SNGPL has been diverting expensive LNG to domestic consumers in the summer months. This year alone, the overall diversion in non-winter months stood at Rs 32 billion which brings the cumulative diversion since inception up to March 8, 2023 at around Rs 83 billion.

Due to depreciation of Rupee against dollar, PSO has an outstanding exchange loss on FE-25 loans of Rs 56 billion on March 6, 2023. The total borrowing against FE-25 loans stood at $ 880 million (June 30, 2022 $ 750 million), with the following break up: (i) exchange loss on FE-25 loans as on June 30, 20222 @ 204/USD, Rs 27.8 billion; (ii) exchange loss during the year, Rs 58.8 billion;(iii) less exchange loss received from MoF during this year, Rs 30 billion.

According to PSO, receivables from power sector have become chronic in nature. Currently an amount of Rs 178 billion is outstanding from power sector entities. Gencos/ CPPA-G owe Rs 148 billion which needs urgent attention and resolution.

“We would like to highlight receivables amounting to Rs 25 billion and Rs 5 billion due from Hubco and Kapco, respectively, which are not being settled by these companies, despite Hubco distributing substantial dividend payouts,” stated PSO.

PSO cautioned the government that default on refinery payment obligations will start from March 14, 2023. The company which currently has market share of 55 per cent in high speed diesel and 49 per cent in motor gasoline, contended that in the absence of immediate payment, the company will not be able to settle international obligations. The financial crunch will also have a snowball effect on IPPs.

PSO has sought payment of Rs 56 billion on account of exchange loss on FE-25 loans and cash injection of Rs 100 billion by arranging financing for SNGPL.

Other immediate steps proposed by PSO to avoid default are as follows: (i) issuance of Sukuk/ PIBs to PSO;(ii) clearing outstanding receivables from Hubco and Kapco amounting to Rs 30 billion and allocation against outstanding receivables from Genco-III;(iii) imposition of Rs 10/ litre levy on the sale of MOGAS and HSD with an impact of 100 billion to be paid to PSO against LNG receivables; and (iv) establishment of a Master Collection Account (MCA) for LNG customers with drawdown rights to PSO.

“PSO has no further cushion available for additional borrowing or refining cash-flow deficit; therefore, immediate cash funds be injected to avoid imminent default,” sources quoted MD PSO as conveying to the federal government.

Copyright Business Recorder, 2023