Power sector circular debt rises to Rs2.6 trillion: PAC told

ISLAMABAD: The Public Accounts Committee was informed on Wednesday that the circular debt of the power sector had risen to Rs2.6 trillion, increasing by Rs1.6 trillion in one year.

It was also revealed in the Public Accounts Committee meeting that no progress had been made on the investment of 8 billion dollars from Saudi Arabia in Pakistan due to the absence of the oil refinery policy. It may be mentioned here that Saudi Crown Prince Mohammed bin Salman during his visit to Pakistan had announced to invest in oil refinery in Pakistan.

The Public Accounts Committee held its meeting under Chairman Noor Alam Khan in which the audit paras related to the Petroleum Division for the year 2019-20 were examined.

Additional Secretary Petroleum said that Saudi Arabia wants to establish an oil refinery in Hub or Gwadar area of Balochistan and the draft of the refinery policy was prepared last month. But still two months are required for cabinet approval and other essential follow-up.

Chairman OGRA Masroor Khan told the committee that the last oil refinery in Pakistan was set up in 2002 and the refinery policy was old. He said due to lack of capacity in oil refineries, 70% of petrol and diesel are imported and only 30% of the finished products are obtained from refineries.

Additional secretary petroleum said that only crude oil was received from Saudi Arabia on deferred payment while petrol and diesel were not received from on deferred payment. The Public Accounts Committee was also informed the government had decided not to set up new power plants with imported fuel and the existing plants will be shifted to other sources.

The Public Accounts Committee expressed its anger over the absence of secretary petroleum and MD of Sui Southern Gas Company, on which the additional secretary petroleum said the secretary petroleum was suffering from Covid. Chairman PAC Noor Alam Khan directed to present the Covid test certificate of secretary petroleum and said that he could have participated in the PAC online.

The committee was informed MD SSGC was on ex-Pakistan leave. Chairman PAC Noor Alam Khan remarked it seems that MD SSGC was out of the country most of the time and wondered if he should be sent abroad permanently.

In a briefing to the committee, secretary Power Division said the sector has production, distribution and tariff issues and it generated expensive electricity from imported fuel. “The change in the value of dollar is also one of the factors for an increase in circular debt,” the secretary power told the committee. He told the committee that power plants import coal from Afghanistan and Africa. “The Afghan coal costs Rs72,000 per ton,” he told the committee.

The secretary told the committee the government had decided not to set up new plants with imported fuel and the existing plants will be shifted to other sources. “At present, we are generating electricity from Thar Coal,” he told the committee.

While briefing the committee on petroleum sector, Chairman OGRA Masroor Khan said five refineries in the country were suffering from problems as most of them were installed in the 1960s while the last oil refinery was installed in 2002.

He told the committee that our refineries cannot produce products according to global standards and 4 to 5 billion dollars are required to upgrade these refineries. “Some 30 percent of petrol is produced by local refineries,” he told the committee.

The chairman OGRA said diesel had risen in the world market after the war between Russia and Ukraine. He told the committee that local production of petroleum products was not even 10 percent of total consumption. On an average, he said two to four petrol tankers arrive in a fortnight and about the same number of diesel ships come and each ship’s price is different from the other. He told the committee that we get unrefined crude oil from Saudi Arabia.

The MD PSO told the committee that the government had fixed dealers’ margin at Rs7 per litre. The dealers association calls for a strike at critical times and the government increases dealer’s margin after negotiations, he said.

Chairman PAC Noor Alam Khan said there was a perception that the petroleum prices would be reduced due to a decrease in international prices but on the contrary these were raised. “I saw on TV that Rs18 was to be reduced on petrol but then suddenly the price of petrol was increased,” he said.

The chairman OGRA said currently, no subsidy was being given on petroleum products. He told the committee that a subsidy of Rs10 per litre was introduced in February and the subsidy, which started at Rs10 per litre, reached Rs80 per litre on diesel but what happened after that was in front of everyone.

While examining the audit paras, the audit officials told the committee that PSO had to collect Rs87 billion from different government organisations, from WAPDA Rs41.8 billion, Hubco Rs25 billion, QEPCO Rs16.6 billion and Rs4 billion from PIA.

The meeting was told that the salary of MD PSO was 32 lakhs while the basic salary was Rs16 lakh. The MD PSO said after paying tax, he gets only Rs22 lakh.