Inside Financial Markets

Non-payment by power sector exposes PSO to liquidity crunch

The state-owned Pakistan State Oil’s economic miseries are on the rise as power sector alone needs to pay Rs224 billion to the entity and has been asked for immediate payment of Rs30 billion to avoid untoward situation.

The top management of the oil marketing company in a letter to the Finance Ministry, of which a copy is available with The News, has sensitised the government that the entity is facing severe liquidity crunch and has utilised all its borrowing lines to the maximum and is unable to get more credit lines to ensure continuation of its operations.

More importantly, in its latest correspondence with the secretary finance, the PSO has also asked for the Finance Ministry’s intervention for payment of dues of Rs14.454 billion which the Pakistan International Airlines (PIA) owes to pay.

The letter mentions that the PIA is repeatedly defaulting on its payment obligations. Though, repeated commitments have been made by the PIA to reduce the outstanding dues, still they are failing to maintain the daily upliftment payments. The PSO also told the Finance Ministry as it is already facing liquidity crunch and non-payment by the PIA is aggravating the situation more. It said it is getting impossible for the PSO to maintain supply chain throughout the country for uninterrupted PIA operations.

Meanwhile, power sector is experiencing unsustainable financial condition just because of subsidy, non-payments and non-settlement of GST refunds. The prime minister has been sensitised about the financial constraints of power sector, reveals a communication of the Cabinet Committee on Energy of which a copy is available with The News.

The communication unfolds that power sector subsidies have so far accumulated to Rs174.97 billion, resulting in non-payments to IPPs in the ongoing financial year along with increase in the payables of PSO. The amount in the head of GST that is needed to be refunded stands at Rs108.2 billion. The burden of Rs283.17 billion (Rs174.97 billion of outstanding subsidies and Rs08.2 billion GST refunds) is now becoming unbearable as cash flow constraints may lead to full-fledged crisis if not resolved on priority.

Baqar Hussain

A Wannabe CFO, just had stepped in the corporate sector, willing to explore every aspect here and learn as mush as i can, awareness for those who dont, get the info where ever possible and stay up to date always.

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)