The ECC’s release of Rs30 billion to the PSO will help the company avoid defaulting on international payments. The PSO was at risk of default due to its increasing receivables, which reached an all-time high of Rs605 billion. The Petroleum Division submitted a summary requesting funds to cover the PSO’s international contractual payments for 1-14 August, 2022.
The finance minister chaired the ECC meeting at the finance division, which was attended by the power minister, former prime minister, and the minister of state for petroleum.
The Prime Minister’s Coordinator on Economy Bilal Azhar Kayani, the Federal Board of Revenue (FBR) chairman, the Oil and Gas Regulatory Authority (OGRA) chairman, and other federal secretaries and senior officers attended the meeting.
ECC was informed by Petroleum Division that there was a decline in PSO’s sales of high-speed diesel and petrol by 28% and 32% respectively. Devaluation of Pakistan rupee against US dollar had resulted in increase in cost of procurement of petroleum products.
To continue oil and gas national supply chain and avoid PSO’s default on international payments, ECC decided to clear the outstanding payments accumulated during the period of pervious government and approved an amount of Rs30 billion as supplementary grant.
The Power Division will make immediate payments of the current outstanding amounts of Rs20 billion by August 1, 2022 and Rs12.8 billion by August 4. The ECC directed the Finance Division and the FBR to submit proposal for generation of Rs30 billion through taxes, within a week.
According to sources, ECC was told that PSO has to pay Rs408 billion to Qatar and Kuwait Petroleum Company (KPC) for liquefied natural gas (LNG) and oil supplies. PSO imports LNG from Qatar through a long-term contract, while the oil it imports from Kuwait Petroleum is on a contract basis.
It is due to the non-payment of dues by the Sui Northern Gas Pipeline Limited (SNGPL), the power sector and the Pakistan International Airlines (PIA) that the PSO’s receivables have increased to Rs605 billion. The SNGPL alone owes Rs337 billion to the PSO on account of the LNG supply received.
The SNGPL has not been able to receive payments from the domestic sector during the last four winter seasons, due to the absence of a legal framework to recover the cost of LNG from the domestic sector.
The previous government had passed weighted average cost of gas from parliament, but it had not been implemented so far. As a result of the non-recovery of bills from the domestic sector, the SNGPL has not been able to pay bills to the PSO, the sources said.