Pakistan State Oil's Receivables Exceed Rs755 Billion, Impacting Business Expansion
This financial burden, primarily caused by delayed payments from government entities, is substantially impeding PSO's strategic expansion efforts. The company's payables to local and international suppliers have also risen significantly.
Karobar
In a concerning turn of events, Pakistan State Oil (PSO), the country's top revenue-generating entity, is grappling with mounting receivables totaling an unprecedented Rs755 billion. This staggering figure accounts for approximately 21% of the company's annual revenue and is posing significant hurdles to its strategic expansion efforts.
The Financial Quandary:
According to PSO's latest financial report, submitted to the federal government, a substantial 90% of these outstanding funds are entangled with various government entities. One prominent contributor to this financial bind is Sui Northern Gas Pipelines Ltd (SNGPL), with a substantial backlog of about Rs478 billion.
PSO, as a state-run fuel supplier, holds a dominant market share, exceeding 50% across various petroleum products. This market share has been steadily rising, driven by fluctuating fuel prices and the reluctance of other companies to maintain the necessary fuel stock levels.
As of the close of Sunday, the total receivables from various entities amounted to Rs754.51 billion, with principal dues accounting for Rs531.4 billion. This, in turn, has led to PSO's payables to international oil product and liquefied natural gas (LNG) suppliers exceeding Rs231 billion. The total payables reached Rs292 billion by October 15, which includes over Rs60 billion owed to local refineries.
The previous fiscal year took a toll on PSO's profitability. Financing costs incurred to sustain operations in the face of substantial non-payments, especially by public sector entities, led to a loss of approximately Rs40 billion. This decline in profitability played a pivotal role in PSO's total profit shrinking to just Rs9.3 billion in FY23, despite a substantial turnover of around Rs3.6 trillion. This was a stark contrast to the profit of over Rs91 billion in the previous fiscal year, with a turnover of over Rs2.7 trillion in FY22.
SNGPL's Significant Role:
Highlighting the issue, PSO disclosed that it had an outstanding receivable of approximately Rs478 billion from SNGPL as of October 16. This includes around Rs115 billion related to late payment surcharges and Rs361 billion in dues for LNG supplies.
The power sector also plays a significant part in this complex financial scenario, with a substantial outstanding amount of Rs185 billion. Of this, Rs151 billion is owed to public sector generation companies and the Central Power Purchasing Agency (CPPA). Additionally, Hubco and Kapco owe Rs29 billion and Rs5 billion, respectively. As a result, PSO's payables related to letters of credit and standby letters of credit with Kuwait Petroleum and Qatar Petroleum for petroleum products and LNG imports have surged past Rs231.4 billion. Payables to refineries stand at Rs60 billion, with a significant Rs32.4 billion owed to Parco.
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The ballooning receivables issue of Pakistan State Oil raises concerns not only for the company but also for the broader economic landscape. As PSO grapples with this financial challenge, it remains imperative for the government and industry stakeholders to work collaboratively towards finding a sustainable solution. This issue, intertwined with the broader themes of Pakistan Economy, Business in Pakistan, and Technology in Pakistan, is a stark reminder of the intricacies involved in maintaining a healthy business environment in the country.
