The govt will give PSO Rs10b because power companies aren’t paying it for oil

August 29, 2018

The federal cabinet’s Economic Coordination Committee (ECC) approved on Wednesday a Rs10 billion financial injection for the cash-strapped Pakistan State Oil (PSO) because power supply companies did not pay their dues. This is because the power companies are also suffering losses.

The ECC held its first meeting since the change of government under Finance, Revenue and Economic Affairs Minister Asad Umar. It was supposed to make key policy decisions regarding subsidising or raising gas prices, subsidies on fertilisers, PSO’s financial situation and circular debt – the amount government owes to power supply companies.

But the finance minister deferred the decisions regarding circular debt, fertiliser imports and gas pricing and sought detailed reports from the relevant departments at the next meeting, scheduled on September 3.

He did, however, approve Rs10 billion for the state-owned oil giant so it could supply imported oil to power generation companies. PSO asked for Rs65 billion.

Government-run power generation and distribution companies say they are facing losses because of electricity theft and people not paying their bills, making them unable to pay for the oil they buy from PSO. To fill this gap, the government has to step in. During the current financial year, the power sector’s total debt has reached Rs1.18 trillion while its circular debt stands at Rs596 billion.

Loss-making government-run companies are a major drain on Pakistan’s economy because they leave little money for the government to spend on development programmes. To deal with the power sector’s debt, the ECC has formed various committees and tasked them with preparing recommendations for further action.