ISLAMABAD: The receivables of the country’s largest oil supplier, mostly emanating from the power sector, are touching a record Rs248 billion, which suggests continuation of chronic circular debt.

The state-owned Pakistan State Oil (PSO) has reported to the federal government that its total receivables increased to Rs247.6bn as of Oct 2. The company’s receivables previously peaked at Rs220bn in May 2013 before the government cleared a circular debt worth Rs480bn through a controversial scheme of cash and book payments.

To highlight its financial sufferings, the company’s management has told the government that around 87 per cent, or Rs214bn, of its total dues were held up with the usual culprit — the power sector. As if that was not enough, the public sector had the biggest chunk of payables to PSO with Rs134.5bn, accounting for more than 54pc, and most of the remaining part originated from the public sector.

This is evident from Rs57bn outstanding against Hub Power Company and about Rs21bn against Kot Addu Thermal Power Company. The two companies are purely dependent on payments by the power companies of the government to clear their dues to fuel suppliers. A senior PSO official said the government was making partial payments only against current supplies and was making no effect to clear backlog of Rs145bn.

PSO reported Rs1.5bn outstanding against K-Electric but that was part of the continuous payment cycle while Rs400 million was overdue against Saba Power and Southern Electric. Of the total Rs214bn outstanding against the power sector, PSO has booked an amount of Rs55.6bn as late payment surcharge.

Pakistan International Airlines and the federal government also owe Rs14.8bn and Rs9.6bn, respectively. Another Rs9.2bn is outstanding with the Sui Northern Gas Pipelines Limited on account of liquefied natural gas (LNG).

Mainly because of these receivables, PSO has outstanding international and local liabilities stockpiled at Rs55.4bn. These included Rs46.2bn worth of letters of credit and standby letters of credit opened in favour of Kuwait Petroleum and Qatargas and other LNG suppliers to ensure smooth supplies. Around Rs9.2bn is payable by PSO to local the refineries. Non-payments could create oil supply crisis, the government has been warned.

No wonder then that the power sector’s own receivables crossed a record Rs684bn mark at the end of last financial year ending June 30, 2016. The final consolidated accounts of the public sector companies suggested a 66pc surge in receivables in three years, despite a drastic 27pc cut in generation cost, better energy mix and purported improved governance.

On top of that, power sector payables also surged 44pc to Rs300bn as of June 30 from Rs207bn three years back despite Rs480bn paid by the government out of public money to power producers and fuel suppliers.

In a consolidated Financial Review 2015-16 of the power sector provided to the Prime Minister Office, the Pakistan Electric Power Company (Pepco) — an umbrella of all distribution, transmission and generation companies — reported improvement in recovery rate to 94.4pc against billed amounts of 2015-16 compared with 89.2pc of the same period last year. Also, it reported decline in overall system losses to 17.9pc in June this year, from 18.7 pc last year.

Pepco said total payables peaked at Rs461bn by the end of 2012 before the government picked up circular debt of Rs480 in June and July 2013. It dropped to Rs207.2bn as a consequence of this settlement criticised by the opposition parties for being in violation of mandatory pre-audit statutory requirement.

The power sector has to pay Rs173bn to independent power producer (IPPs), Rs76bn to oil companies, Rs19bn to banks as debt-servicing cost and Rs32bn to various generation and transmission companies as on June 30, Pepco said.

The report said the power sector receivables have maintained an upward journey since 2011 when it stood at Rs286bn. These outstanding amounts against various consumers stood at Rs411bn as of June 30, 2013 — soon after the PML-N came to power — and then kept on increasing albeit at a slowing pace. For example, the receivables reached Rs513bn by the end of June 2014, up 25pc, followed by 23pc increase to Rs633bn in 2015 to settle down at Rs684.06bn at end-June this year, up 8pc.

Ironically, the outstanding bills against the private sector more than doubled to Rs423bn in June this year from Rs197bn in 2012 despite the fact that power supply to common consumers is disconnected after 35 days of non-payment.

The liabilities against the federal government on account of various consumer categories and share in subsidies stood at Rs17bn as of June 2016 while Sindh

topped the list among provinces with dues of about Rs74bn. Punjab’s outstanding power bills amounted to Rs5.7bn, Khyber Pakhtunkhwa Rs880m and Balochistan Rs18.6bn.

Bills outstanding against Azad Jammu and Kashmir stood at Rs65bn, K-Electric Rs46bn, Federally Administered Tribal Areas Rs21bn and consumer share of agricultural tube wells in Balochistan have been booked at Rs127bn with little chances of recovery unless settled by the federal or provincial governments.

Likewise, another amount of Rs19bn has been booked against KP on account of delayed tariff increase due to court cases but this amount is unlikely to be recovered.

The government has been also informed that the fuel cost of power generation gradually dropped from a peak of Rs10.14 per unit at the end of fiscal year 2013-14 to Rs7.42 per unit, down 26.82pc, mainly because of fall in international oil prices.

Published in Dawn October 12th, 2016