Inter-corporate circular debt in petroleum sector hikes to Rs1,505 bn

ISLAMABAD: The intercorporate circular debt in petroleum sector has risen to whopping R1,505 billion virtually affecting the smooth functioning of the public sector main companies such as Pakistan State Oil (PSO), Sui Northern Private Limited (SNGPL), Sui Southern Gas Company Limited (SSGC), Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), and Pakistan LNG Limited (PLL).

The receivables of the said six state owned companies have hiked to Rs2,703 billion while the payable are amounting to Rs1,198 billion. And if the payables are adjusted against receivables, between the entities, then the inter-corporate accumulated circular debt stands at Rs1,505 billion.

This circular debt report has been prepared by the petroleum division which will be pitched in the meeting of cabinet Committee on energy (CCoE) scheduled for Friday next. According to the report, the receivables of the six state owned companies have accumulated up to Rs2,703 billion which also includes the LPS (late Payment Surcharge) of Rs617.929 billion. The receivables of PSO stands at Rs355.834 billion, PLL Rs91.791 billion, PPL Rs458.437 billion, SNGPL Rs553.437 billion, SSGC Rs550.304 billion and OGDCL Rs693.240 billion. Cumulatively their payables including LPS stands at Rs1198 billion. The report also mentions that these companies have so far borrowed a huge amount of Rs104.960 billion to run their operations.

The top bosses at Petroleum Division, well informed sources at Energy Ministry told The News, want to resolve the inter-corporate debt by adjusting the principal amount of the said entities. The principal amount of receivables of the six state owned companies, with the exclusion of the LPS amount stands at Rs2,085 billion and payables with exclusion of both LPS and borrowing remains at Rs1,060 billion and this is how the net inter-corporate circular debt has accumulated at Rs1025 billion as the principal amount. Top sources said that Petroleum Division in the CCEO meeting would also suggest the way forward to cope with the rising circular debt.

“We will recommend in the CCOE meeting to convert the TFCs (Term Finance Certificates) issued by the government in 2013 to settle down the Rs480 billion circular debt. The then government had issued TFCs amounting to Rs82 billion which did not materialize. However the amount of Rs50 billion has also been added as markup. “Petroleum Division wants the government to issue the PIBs (Pakistan Investment Bonds) valuing Rs132 billion instead of TFCs. They argued that TFCs have no value in the market whereas, PIBs enjoy the marketing value.

They said that the GDS amount stands at almost Rs550 billion which surged in the last three years because of the increasing gap between prescribed price and notified consumers price of gas.

They said that Petroleum Division in CCOE meeting would recommend OGRA to keep consumer gas price at par with prescribed price (the actual cost of gas) and if the government cannot afford it then it would have to budget the subsidy on real time data basis and issue the amount as subsidy in time to the gas companies.

“Another major issue is coming from the power sector which has to pay Rs250 billion and in the case Petroleum Division wants the government to either issue PIBs amounting to Rs250 billion to PSO, OGDCL and PPL or give them a shareholding in profit making power generation companies, against their receivables from the power sector.”