“For the smooth continuity of oil and gas national supply chain and to avoid PSO from being default on international payments, the ECC has decided to clear the outstanding payments accumulated during the period of pervious government and approved an amount of Rs30 billion as supplementary grant for PSO”
By Staff Reporter
ISLAMABAD: State-run Pakistan State Oil (PSO) was rescued by the government on Sunday through a Rs30 billion emergency funding as the state-run oil giant, buckling under the cost of soaring oil import prices and stuck-up receivables, was racing against the clock to avoid becoming the country’s first default.
“For the smooth continuity of oil and gas national supply chain and to avoid PSO from being default on international payments, the ECC (Economic Coordination Committee of the Cabinet) has decided to clear the outstanding payments accumulated during the period of pervious government and approved an amount of Rs30 billion as supplementary grant for PSO,” a statement, issued after an ECC meeting held on SOS call for fund for PSO, said.
Minister for Finance and Revenue Miftah Ismail chaired the meeting.
PSO made a SOS call for funds to meet its international contractual payments due in the first two weeks of August 2022. The government has decided to immediately release payments of the current outstanding amounts of Rs20 billion by August 1, 2022, and Rs12.8 billion by August 4, 2022.
PSO is facing a severe liquidity crunch as its receivables swelled to Rs608 billion as of July 28, 2022, following default by gas and power companies. As a result, the company has failed to make Rs80.7 billion payments to Kuwait Petroleum Corporation. Further the PSO has not been able to deposit Rs16 billion under ITFC facility.
Further there has been a decline of sales of high-speed diesel and motor gas by 28 percent and 32 percent respectively, having an impact of Rs69 billion on PSO’s collections, while devaluation of the rupee against dollar – 17.8 percent in July 2022, has also resulted in an increased cost of procurement of these products by Rs63 billion.
The Power Division had warned the government that PSO has to make an international payment of Rs267 billion in the first forthnight of August and Rs 20 billion in between August 15-28 otherwise there will be disruption of oil and gas supply chain in LNG and petroleum products.
“PSO receivables from government against exchange loss of Rs54.6 billion should be released immediately. For the remaining amount of Rs45.4 billion direction should be issued to the National Bank ofPpakistam and other banks to extend the credit lines for PSO on an emergency basis,” it said in a summery on PSO’s urgent call for funds.
Officials said the government has not mentioned any funds for PSO in the current financial year’s budget and the required financial support will result in an outflow of funds beyond the numbers and “understanding” agreed with the IMF.
“But to rescue the default like situation in PSO and to avert an imminent disruption of energy supply chain, all possible measures are required to be taken collectively in a sustained manner,” a senior official said.
The government statement said the ECC also directed finance division and FBR “to submit proposal for generation of Rs30 billion through taxes, within a week.”
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