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PSO suggests a levy of Rs. 10 per litre on gasoline and diesel to prevent default

In order to avoid default, Pakistan State Oil (PSO) has submitted to the government a payment arrangement formula that calls for the implementation of a Rs. 10/litre tax on the sale of Mogas (petrol) and High-Speed Diesel (HSD), with an associated cost of Rs. 100 billion.

Few days before the Economic Coordination Committee (ECC) of the Cabinet approves Rs 50 billion, PSO’s managing director underlined the financial situation of his company. He categorically warned that as of March 14, 2023, PSO might not be able to fulfil its financial obligations for imports, taxes, and refineries, according to Business Recorder.

Notwithstanding the difficulties brought on by fast rising receivables, PSO has managed to keep the nation’s supply network operational. PSO has accumulated receivables totaling Rs. 762 billion since June 30, 2022, of which Rs. 598.586 billion is principal and Rs. 163.570 billion is a Late Payment surcharge (LPS).

Receivables from SNGPL, which presently amount to Rs. 494 billion, are a major factor in PSO’s declining liquidity situation. As of June 30, 2022, there were Rs. 292.3 billion in principal outstanding receivables out of Rs. 494 billion. The winter gap (November 22–February 20, 2023) was Rs. 105.6 billion, whereas the summer shortfall (July 22–October 20, 2022) was Rs. 32.2 billion.

This indicates that on February 7, 2023, there were Rs. 430.1 billion in outstanding receivables; however, after adding LPS of Rs 494.2 billion.

PSO asserts that it received Rs. 100 billion in additional bank loans against the GoP guarantee in an effort to overcome the deficit. SNGPL redirected pricey LNG to domestic customers during the summer. On of March 8, 2023, the total diversion since inception will have been about Rs. 83 billion (Rs. 32 billion) in non-winter months alone.

 

As of March 6, 2023, the rupee’s depreciation against the dollar has resulted in an exchange loss on FE-25 loans of Rs. 56 billion that the oil company has not yet recovered. $880 million (June 30, 2022: $750 million) total was borrowed against FE-25 loans, divided as follows:

as of June 30, 20222, at 204/USD, the exchange loss on FE-25 loans was Rs. 27.8 billion;

Less exchange loss received from the MoF for this year, Rs. 30 billion, and exchange loss for the year, Rs. 58.8 billion.
PSO estimates that firms in the power sector currently owe a total of Rs. 178 billion. It had informed the government that on March 14, 2023, refinery payments would start to fall behind. The business asserted that it won’t be able to fulfil its responsibilities abroad without prompt payment.

As is to be expected, PSO has asked for Rs. 56 billion in compensation for exchange losses on FE-25 loans, including Rs. 100 billion in capital infusion by setting up finance for SNGPL.

 

The issuing of Sukuk/PIBs to PSO, the payment of Rs. 30 billion in unpaid receivables from Hubco and Kapco, and allocating funds against unpaid receivables from Genco-III are further immediate actions suggested by PSO to avoid default.
Additional recommendations included the introduction of a Master Collection Account (MCA) for LNG consumers with PSO drawdown rights and the imposition of a Rs. 10 per litre tax on the sale of MOGAS and HSD, with an estimated impact of Rs. 100 billion to be paid to PSO against LNG receivables.

 

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