Daily Times

Amid government claims of controlling energy shortages and improving recoveries, a staggering Rs250 billion has been added to the outstanding dues of the Pakistan State Oil (PSO) since June 2013. This is the highest amount of receivables in the accounts of the country’s largest fuel supplier that had peaked at Rs220bn in May 2013 before the government cleared the amount through a controversial scheme of cash payments and book adjustments. The PSO’s management has repeatedly written to the ministries of water and power, petroleum and finance about its difficult financial position in recent weeks and sought proactive support. This comes at a time when the ministry of water and power reported last week to Parliament that circular debt stood at Rs321bn in June after an addition of Rs47bn in the fiscal year 2015 alone. This was in addition to the backlog of about Rs335bn parked in the Power Holding Company (PHCL) and now being financed through debt servicing surcharge as part of the consumer tariff.

The government did not pass on two consecutive reductions in consumer tariff determined by the power regulator for fiscal years 2015 and 2016 as it facilitated the ten distribution companies to seek stay orders from the Islamabad High Court. The power sector receivables had posted a 66pc increase in receivables despite 27 per cent cut in generation cost, better energy mix and purported improved governance.

After taking office in 2013, the government was faced with a circular debt more than Rs500 billion. The amount was cleared, and the government had vowed to keep the circular debt under control. But as of the recent figures presented in the parliament, the debt has crossed Rs300 billion already. The dues of private companies have now risen to Rs64bn. On top of that, about Rs7.1bn dues have piled up against the Sui Northern Gas Pipelines Limited (SNGPL) on account of imported liquefied natural gas. The PSO also reported that about 88 percent of its total dues were held up with the usual power sector. Mainly because of these receivables, PSO’s outstanding international and local liabilities stand at Rs60bn, including payments to be made to Qatar and Kuwait for LNG and fuel supplies. Under the IMF assistance programme, improvement in the recovery of electricity dues and the privatisation of the power sector companies was urged. So far, the government has been unable to deliver on these conditions, and the delay has come back to haunt it in the form of the piling circular debt. The inefficiency of the power sector has not allowed the reduction in power production costs to be passed down to the consumers as the government has resorted to increased power rates to cover the losses. The private sector needs urgent reforms in order to stabilise in the long term. Otherwise, the situation will continue to be a burden on the national kitty. *