PSO may default on LCs due to financial crisis

Wednesday, 10 June 2009

ISLAMABAD: The state-run Pakistan State Oil may default on the letters of credit backed by sovereign guarantees and opened for the import of motor gasoline, furnace oil and diesel as the entity is in financial crisis because of circular debt in the energy sector. “Outstanding dues of Pakistan State Oil have swelled to Rs94 billion, which the power sector and the Pakistan International Airlines (PIA) owe

to the company,” a senior official at the Ministry of Petroleum and Natural Resources told The News.

If the indifference on the part of government continues, the fuel supply chain will experience an unprecedented stress, which will aggravate power crisis as 70 per cent electricity is generated from diesel-run powerhouses and in case the fuel supply chain gets disturbed the current power deficit will surge to about 3500 MW.

When contacted Dr Asim Hussain, Advisor to prime Minister on Petroleum confirmed that the PSO is running into massive financial miseries owing to which it is nearing collapse for which he is right now writing an SOS letter to Prime Minister and Finance Ministry seeking the immediate payment of outstanding amounting to Rs50 billion against the total dues of Rs94 billion piled up so far.

Dr Asim Hussain said that Finance Ministry’s chief is also well aware of the situation and is to release the required amount against the outstanding after the budget announcement. “We have 15 days left in being declared as default, but I am hopeful that after the budget some reasonable amount will be disbursed to cash stricken PSO.” To a question if the situation is not rectified then, PSO will be declared default, which will have very negative impact on country’s economy.


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