Liquidity constraints for PSO; threats to cut down fuel supply

Pakistan State Oil (PSO) has threatened to all of its defaulting customers to immediately repay the outstanding dues otherwise any further supply of fuel will be cut down until the payment.

The petroleum supplier issued a strict statement on Friday to stop fuel supply to the defaulting debtors, mainly in the power sector and airlines, focusing on the issue that their delayed payments have created some serious liquidity
problems for the company. According to the statement, huge blockage of receivables amounting Rs. 179 billion have crippled PSO’s liquidity position and the company has been threatened to a possibly inevitable breakdown in the supply chain in the near future.
Such circumstances in the coming days might cause drastic fuel shortage countrywide, causing serious damages to petroleum based industry.

The fuel supplier has claimed that despite of non-payments from the power sector on several prior occasions, the company has someway managed to keep the supply chain uninterrupted. PSO has been providing fuel worth an average of
Rs. 32 billion per month to the power sector but has not been receiving payments on timely basis.

Major power sector entities, namely HUBCO, WAPDA and KAPCO, have been persistently defaulted their obliged payments to PSO, with an average deficit of Rs. 10 billion per month for the past six months. Merely Rs. 5.2 billion was
paid out to PSO in the month of November, forcing the fuel supplier to take such strict measures against its customers.

The other major default has been committed by the national carrier, Pakistan International Airlines (PIA), which has been carrying on the similar course as the power sector does, violating its payment agreements with PSO over and
over again. PSO has ensured the best of its support to PIA in every possible manner to keep the national interest in view but the airline company has continuously defaulted in recent past.

PIA owes Rs. 3.4 billion to PSO till date but has been irregular in payments to its supplier. The national carrier had promised to pay back Rs. 1 billion of the outstanding dues by the end of October but not only it has violated
this agreement but has even stopped the daily fuel payment to PSO as well.

Under the current liquidity problems faced by PSO, the company is left with no option but to cease its sully of fuel to the defaulting customers until they clear the outstanding receivable amount.