PSO to recover Rs 614b in circular debt. PSO has to recover from power sector and Sui Northerner Gas
Channel: Mediatrack
Date: 2022-11-30

ISLAMABAD: The supply of expensive liquefied natural gas (LNG), during the past four seasons, to domestic consumers has resulted in a steep hike in circular debt, trapping gas-utilities and Pakistan State Oil (PSO).

The gas sector is currently facing circular debt of Rs1.5 trillion, with LNG being the major contributing force. Additionally, captive powerplants and fertilizer plants have been receiving gas at discounted rates which has also contributed significantly to the ballooning of circular debt.

PSO, which is a key importer of LNG from Qatar, supplies the commodity to gas-utilities which then distribute and market it to customers.

Previously, the power sector was PSO’s key defaulter. Of late, however, Sui Northern Gas Company Limited (SNGPL) is the key defaulter, with a debt of Rs373 billion on account of LNG supplies.

Following government directives, SNGPL sells Regasified Liquefied Natural Gas (RLNG) to various subsidised sectors including the fertiliser industry, export-oriented consumers and the domestic sector. Due to the subsidised tariff, however, SNGPL’s ability to pay RLNG suppliers, such as PSO and Pakistan LNG Limited (PLL), has been impacted.

Against the subsidies granted, SNGPL’s receivables from the government to date stand at around Rs199 billion. In addition to the Rs373 billion owed to PSO, SNGPL also has to make a payment of Rs135 billion to PLL, another state-run LNG importer.

While the power sector usually pays in full, currently SNGPL’s receivables from the sector have increased to nearly Rs115 billion, another factor resulting in the delayed payments to its suppliers.