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Alarming surge in circular debt of Pakistan Stae Oil (PSO) - LahoreEstate - 11-24-2009 08:43 AM
ISLAMABAD: The net amount of inter-corporate circular debt has once again crossed Rs135 billion despite release of over Rs187 billion to the power and petroleum companies and about Rs290 billion liabilities picked up by the ministry of finance over the last 10 months, it is learnt.
Sources in the finance ministry said the finance ministry has run short of options to provide more funds to the power sector because it has already raised more than Rs157 billion from the banking sector through issue of term finance certificates in two instalments, which is repayable at an interest rate of about 15 per cent.
The receivables of Pakistan State Oil (PSO) have again risen to Rs73 billion as of November 20, 2009 despite recent payments of over Rs78 billion by the government and the power companies, these sources said. It has to get Rs29 billion from Pepco, Rs35 billion from independent power producers (IPPs), Rs2 billion from PIA and Rs3 billion from the federal government.
On the other hand, it has to pay about Rs50 billion to the refineries and Rs28 billion to the foreign suppliers. PSO has to pay over Rs8 billion in interest payments at the rate of Rs24 million per day against an overdraft of about Rs40 billion. Moreover, over Rs66 billion worth of letters of credit against import of different petroleum products by PSO would become payable between November 24 and December 31, 2009, these sources said.
Pakistan Electric Power Company (Pepco) currently sits on over Rs70 billion worth of payables to the oil companies, these sources said. ‘The gross circular debt today is more than Rs250 billion. Suppose, all the energy sector companies clear their dues, net outstanding dues would stand at Rs135 billion,’ the sources said.
The refineries currently owe about Rs31 billion to the Oil and Gas Development Company Limited (OGDCL), while the later has to recover another Rs10 billion from gas companies, these source said.
The government that had committed with the international lending institutions to eliminate entire circular debt and provide only Rs55 billion on power tariff as subsidy has so far released about Rs23 billion to the power companies on account of power subsidy.
Finance Minister Shaukat Tarin had announced in July this year that circular debt had successfully reduced to Rs70 billion and the rest of the amount would be cleared by December. However, the debt has almost doubled since then.
Mainly because of the circular debt, most of the refineries are running at half their production capacity and resulting in flight of capital for the import of refined products. Also most of the petroleum and power companies are paying heavy debt servicing cost to meet their day-to-day operations.
http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/business/09-alarming-surge-in-circular-debt--szh-03