7/26/2019 Energy Sector Hit Hard by Financial Anomalies

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Energy sector hit hard by financial anomalies

Receivables of power sector swell to Rs600 bn; circular debt touches Rs300 bn

Khalid Mustafa

Friday, November 28, 2014

From Print Edition

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ISLAMABAD: The worst governance continues to hit the energy sector due to which the

receivables of Power Electric Power Company (Pepco) alarmingly surged up to Rs600

billion by October 31 and the circular debt has gone up to Rs300 billion that has also

adversely affected the state owned oil marketing company Pakistan State Oil (PSO), top

sources in Ministries of Water and Power, and Petroleum and Natural Resources told The

News.

PSOs many Letters of Credit (LCs) and overdraft (OD) lines have got choked because of non-

availability of payment capacity. So much so, the PSO has defaulted of five banks that include

NIB, NBP, MCB, HBL and UBL, one of the top mandarins of petroleum ministry told.

He went on to highlight the miserable financial state of the entity, saying that PSO has failed to

pay Rs4.6 billion to the NIB bank that it had borrowed from the bank and now got defaulted of

the said bank. Likewise, MCB has also declared PSO its defaulter as the state owned OMC

cannot pay the credit line of Rs2.6 billion on time. PSO has also got defaulted of the NBP, UBLand HBL.

This means the state owned entity will not be in a position to get more credit lines formaintaining the operation of importing POL products in the country. Some of the banks in their

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7/26/2019 Energy Sector Hit Hard by Financial Anomalies

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correspondence to the top management of PSO clearly warned of reviewing their existing

relations with the said oil marketing company.

The latest financial statement of the PSO available with The News disclosed that it has virtuallylanded in the deep financial constraints as its receivables have jacked up to Rs223 billion out of

which power sector alone needs to pay Rs200 billion and PIA Rs13 billion. The payables of PSO

are also on the increase and have now swelled to Rs179 billion.

The top official of Ministry of Water and Power told that till September 30, 2014, the receivables

of Power Electric Power Company (Pepco) stood at Rs577 billion that further jumped to Rs600

billion by October 31 showing the government has miserably failed in improving the revenueoutlook of the power sector.

The official said that payables of the Pepco stand at Rs274 billion. And out Rs600 billionreceivables, four provincial governments, AJK and KESC owe to pay Rs200 billion to Pepco and

private sector Rs400 billion.

Meanwhile, many of the IPPs have also warned of invoking sovereign guarantees for not gettingtheir arrears and they have also reduced the electricity generation. The writ of the government

has weakened that is why the private sectors arrears are on the rise. Electric Power DistributionCompanies are not law enforcing entities and cannot take the defaulters to task. The main chunkof arrears in the head of private sector is needed to be paid by running defaulters that include the

big industrialists.

As far as the arrears provincial government, AJK and KESC owe to pay are concerned, theofficial said that political will is required to cope with this problem. The official said that there is

no let-up in losses the power sector is sustaining. If the official figure of 18.5 percent losses is

accepted, then 6 percent losses out of 18.5 percent system sustains because of electricity theft

meaning by that whole system faces loss of Rs50-60 billion per annum.