PSO circular debt mounting

Saturday, August 22, 2009

KARACHI - The circular debt of PSO is mounting and the company is facing Rs 2 billion losses per day, as the power sector, the major buyer of furnace oil, is defaulted in payback to PSO. At present, outstanding dues from HUBCO, KAPCO, PEPCO and PIA stand at Rs 91,788b, The Nation learnt from sources. The source added that WAPDA has to pay Rs 28,536b; HUBCO has to pay Rs 36,398b and KAPCO to pay Rs 19,522b to PSO. OGDC has to pay Rs. 371m, Kohinoor Energy Rs 548m and Saba Energy has to give Rs 616m. The financial charges receivable from PIA now mounted up to Rs 684m and the audited price differential claim is Rs 2,757b, which the PSO has to receive. Due to increasing demand of FO for the power generation sector, PSO has been supplying 35,000 MT of furnace oil per day. The government has directed PSO to fulfil the demand of furnace oil in power sector in order to control the power crisis in the country. But by doing so, the circular debt is increasing, which is alarming for the company, the source added. The company was assured by the government that the issue of circular debt of power sector would be resolved in August. But PSO is still waiting for the amount in its account. If the issue of circular debt is not solved, the financial condition of PSO will be more deteriorated than it is at present, he said. It is worth noting that the price of furnace oil has been surged up record high during this year due to higher consumption. The price of furnace oil is Rs 44,064 per MT to Rs 46,944 per MT, which was Rs 41,521 per MT to Rs 44,044 per MT. This hike in price occurred within a month of August, bringing much defaulting burden on the company. On increased power generation through FO, an energy sector expert commented that in this situation it is worth considering that why the power generation has been shifted to thermal generation, as it is proved to be the most expensive one.

This has not only affected the financials of oil company, it will also affect the power tariff. It would not be possible for the government to continue supplying electricity on same rate, people should expect power tariff hike in coming days. Even government realises that this way of power production is costly but still it is going for the short-term solutions of power production. The alternate means of power generation should be considered for long-term solutions. Rental power plants will only add more financial burden on the government and on the fuel sources of the country. It is no way in the favour of our current financial condition to increase the oil import bill to many folds by moving toward thermal power generation. The government should consider the aftermaths of the introduction of rental power plants in the country. PSO s sales volume grew of furnace oil has been up by over 10.2pc which enabled the company to enhance its market share appreciably from 82.3pc in FY08 to 85.8pc FY09. This actually demonstrates company s ability to meet the rising furnace oil demand from the power sector. It is pertinent to mention here that during FY09, the loss after tax came to Rs 7 billion versus profit after tax of Rs 14 billion during FY 08, mainly due to higher financial servicing cost and the inventory losses. The company registered Rs 18.9 billion on account of net inventory losses during FY09 as compared to inventory gains of Rs 11 billion during FY08.

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