ISLAMABAD: A dividend based formula to clear the circular debt of energy companies, including Pakistan State Oil (PSO) has been supported by the Special Assistant to the Prime Minister on Petroleum Nadeem Babar in a meeting held today.
“This might be possible if one of the companies has sizeable cash to initiate. However, this may be considered partially if required,” he said.
Finance Division has proposed the matter to consult with Securities Exchange Commission of Pakistan (SECP) to clear the circular debt of energy companies, including Pakistan State Oil (PSO). The dividend base formula was floated by the chief financial officer of PSO Yaqub Sattar in a recent meeting with Secretary Petroleum.
Yaqub Sattar had floated an idea of generating funds through different public sector companies’ cash dividends to clear the debt. The idea envisages clear a debt through book adjustment. He explained that the time dividend model was more feasible as major receivables/payables pertained to public sector companies.
MD PSO suggested that besides OGDCL, PSO could also generate cash by withholding refinery’s payable for a short period so that some part of the debt may be adjusted through a dividend. Additionally, the finance secretary suggested consulting SECP on the dividend option. Nadeem Babar suggested initiating first through paper adjustment and by writing off Late Payment Surcharge (LPS) by end to end at the government’s part.
A representative of Sui Southern Gas Company (SSGC) said that their late payment surcharge (LPS) does not come in the bottom line of profit and goes to consumers, having no contribution in settling the circular debt.
Nadeem Babar advised reducing the rate of late payment surcharge (LPS) and gas development surcharge (GDS) of gas companies to avoid a further increase in circular debt. Secretary petroleum division pointed out certain legal implications in gas development surcharge (LDS) option.
Additional secretary finance requested to provide details on gas development surcharge (GDS) and desired to provide period-wise receivables and payables from the power sector with late payment surcharge (LPS) to map the circular debt.
The circular debt in gas sectors had jumped up to Rs 1.6 trillion. Earlier, the petroleum division had given several proposals to the Economic Coordination Committee (ECC) to clear a circular debt.
However, the assistant to the Prime Minister on power said that the power sector was also facing circular debt. He also pointed out that the petroleum division should not look at circular debt in isolation in the gas sector.