After three years of flattening out, the circular debt is back in our lives.

For a number of days, we witnessed the spectacle of independent power producers taking out ads in major newspapers saying their outstanding receivables had jumped to Rs414bn again, and threatening to call in their sovereign guarantees to ensure payment. Now we hear of massive furnace oil stocks piling up at the refineries and ports and other storage depots while offtake plunges.

According to a report in this paper, furnace oil stocks are now enough to cover 40 days of consumption, while offtake is half of what it is supposed to be. Part of the reason may be due to the greater availability of gas, part of it certainly because of the finances. An equal part is the result of an unexpected plunge in demand for electricity due to a cold spell in the month of March.

Since the finance ministry is either unable or unwilling to release its share of the power sector subsidy, and the FBR has stuck up refunds equal to just under a third of the total circular debt, liquidity for the power sector is being strained once again, just as it happened in the run-up to the petrol crisis of January 2015.

In the past, this has presented a problem in the form of the sudden constriction of supplies. This time it is the opposite. The inability of the power sector to lift stocks means the supply line is choked with supplies, leading to congestion at the ports and tankers filled with oil waiting in long lines outside the power plants.

This time it is the members of the oil supply chain who are up in arms, with the refineries and petroleum ministry complaining of excess fuel stocks, while the ministry either lacks the funds to lift the supplies or has let them accumulate while demand returns.

If the situation concerning furnace oil is not checked, other fuel categories will be affected, and the availability of motor gasoline, diesel or jet fuel impaired — it will be the second time that we see the power sector liquidity issues create a wider fuel supply crisis in the country.

This is more than just bad planning, as some quarters are trying to suggest. It is evidence that the underlying weaknesses in the fuel supply chain, and how they interact with the power sector, can create a wider crisis.

Published in Dawn, March 17th, 2017