Pakistan State Oil (PSO) continues to face the issue of circular debt despite making heavy profits in the last fiscal year. Recently, the company announced its highest-ever after-tax profit of Rs29.1 billion for the financial year 2020-21. Even though it claims to have improved its balance sheet, PSO’s receivables from all the clients touched Rs362 billion.

PSO has recovered Rs25.8 billion from the power sector along with late payment surcharge income.

At present, PSO is to recover Rs362 billion from its clients. Earlier, the government had made a payment to independent power producers (IPPs) who made payment onwards to PSO.

Due to this, the outstanding had declined to Rs243 billion. However, they continue to rise and touched the Rs262 billion mark now.

The company management has reduced finance cost by Rs3.2 billion that had further complemented the profitability of the company. However, it is still facing a critical time due to all-time high receivables.

PSO supplies oil to different clients and now a new phenomenon in the shape of circular debt has emerged on account of liquefied natural gas (LNG).

Of the total, PSO has to receive Rs185 billion from the power sector on account of oil supply for power generation.

Generation companies are major defaulters that have to pay Rs138 billion. Hubco owes Rs38 billion, whereas Kapco has to pay Rs8.4 billion.

PSO has also played a pivotal role in the LNG sector. The company entered into another agreement with Qatar Petroleum under G2G arrangement to supply an additional three million tons of LNG for a period of 10 years.

This contract shall add additional volumes to an already executed 15-year long-term sales purchase agreement (SPA), making PSO the largest supplier of LNG in the country with a supply base of 6.75 million tons per annum.

However, the company is facing circular debt issue in this sector. It is supplying LNG to the Sui Northern Gas Pipelines Limited (SNGPL) to distribute to the consumers.

SNGPL has to pay Rs139 billion to PSO on account of LNG supply. This is a new addition in the circular debt chain in the oil and gas sectors.

Pakistan International Airlines (PIA) is another big defaulter of PSO. PSO supplies jet fuel to the airline to continue its operations. However, it has not been able to pay dues to PSO on account of fuel supply.

PIA has to pay Rs21.5 billion to PSO. The state-run oil company is due to receive Rs9.2 billion from the government on account of price differential claims.

The story was filed by the News Desk.
The Desk can be reached at info@thecorrespondent.com.pk.

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