Pakistan International Airlines (PIA) has failed to make a payment of around Rs26 billion to state-run oil marketing giant Pakistan State Oil (PSO) for oil supplies, resulting in a further increase in the uncontrollable Circular Debt.

PSO has been struggling to continue the provision of fuel, which is vital for PIA to continue its domestic and international operations.

The national flag carrier had committed to pay Rs150 million but released only Rs141 million on Monday. It had also committed to pay another Rs500 million. “PSO is a commercial entity, how long it can bear customers on credit as the company is itself suffering from circular Debt, which is piling up due to non-payment by power producers, SNGPL and PIA,” an official of the Petroleum Division remarked while talking to The Express Tribune.

PSO has so far managed to ensure uninterrupted fuel supply to PIA according to demand. It is working closely with relevant authorities to recover its dues.

It is not only PIA, other companies also have to pay huge amounts to PSO. Another major defaulter is the power sector, which has to pay Rs184 billion. Gencos owe Rs150 billion, Hubco Rs28.4 billion and Kapco Rs5 billion on account of fuel supply to power plants.

The price differential claims of PSO stand at Rs8.9 billion (1996-2014) and the exchange rate difference on FE 25 loans was Rs72 billion.

In addition to the circular debt pertaining to oil supplies, a huge amount of circular debt has emerged in the provision of liquefied natural gas (LNG) owing to delay in payments by the public gas utilities.

Sui Northern Gas Pipelines Limited (SNGPL) has to pay Rs468.9 billion to PSO on account of LNG supply. Being a key supplier of LNG, PSO imports gas from Qatar under long-term contracts.

PSO has receivables of Rs759 billion from all clients, where LNG’s share is Rs468.9 billion.

However, officials of the Petroleum Division pointed out that SNGPL itself had to receive billions of rupees from domestic customers for LNG supply in previous winter seasons.

Previous governments had provided LNG to domestic consumers in winter to overcome the gas crisis. However, no legal framework could be put in place to recover the LNG cost from domestic consumers.

The Pakistan Tehreek-e-Insaf (PTI) government managed to get the weighted average cost of gas bill passed in parliament to recover the full cost of LNG.

However, the PPP-led Sindh and other provinces opposed the bill, which could not be implemented.

As PSO is stuck in the circular debt, it also has to pay Rs58 billion to domestic refineries and Rs72 billion to Kuwait Petroleum Company and LNG suppliers.

Published in The Express Tribune, October 11^th, 2023.

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