Pakistan State Oil (PSO), perhaps the most important national institution in country’s energy landscape, is struggling to recover Rs. 325 billion from the government, GENCO’s and IPPs. It has incurred loans of around Rs. 100 billion from commercial banks to keep running its vital operations, of oil import, and this is costing it Rs. 1 billion in interests every month.
Add to this that PSO burdened with all its challenges does not even have a permanent Chief Executive Officer (CEO) – and the one who is serving as Acting CEO is on ECL. Reportedly its CFO is also on ECL. What if PSO goes bankrupt or collapses?
Reportedly, PSO Board of Directors had decided to bring in a permanent MD/CEO but is struggling to put an advertisement in the newspapers due to bureaucratic stonewalling and dysfunctional decision making in Islamabad.
PSO is the main organ of the state that imports oil from abroad, mainly the middle eastern countries, and then it provides to all the independent power producers (IPPs), including Gencos, Sui Northern Gas Pipelines Limited (SNGPL) and other government bodies.
PSO’s total receivable, at this moment, from Gencos & IPPs, government organizations, and Ministry of Finance are Rs175 billion, Rs100 billion and Rs50 billion, respectively – making the total receivables Rs 325 billion.
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Among the government organizations, the Sui Northern Gas Pipelines Limited (SNGPL), alone has to pay Rs. 65 billion.
PSO borrowing from Banks?
PSO is tasked with the vital responsibility of supplying the power producers with oil from all sources. This is something which can not not be suspended. Any break in this operation will lead country to a huge energy crisis. But since it has not been paid for the oil it has delivered to IPPs, GENCOs and the government, PSO is compelled to borrow from commercial banks, it has so far borrowed almost Rs. 100 billion.
This situation has further burdened PSO with interests of Rs. 1 billion per month towards banks. The PSO insider that spoke with GVS on condition of strict confidentiality was of the opinion that the situation is untenable over the long run, and needs quick government decision making in Islamabad. However Islamabad seems to be suffering from a decision paralysis.
This situation is very frightening for an organization without which the economy can’t function. Analysts, GVS spoke to, argue that PSO is one of the key element in the overall scenario of the circular debt; they fear that the state organization is likely to crumble under the huge pile of debts and liabilities if the government doesn’t resolve the issues.
Government’s Decision Paralysis?
PSO sources while talking to GVS maintain that the government in Islamabad has displayed little understanding of the complexity of the issues. It has failed to place necessary expertise on table that can address the issues. One well placed PSO source described the ex-petroleum minister Ghulam Sarwar Khan as “someone who had no understanding of issues and did not take interest in anything other than transfers and postings..”
With the recent reshuffle in the cabinet, they said, no one has so far been given the portfolio of the petroleum minister, adding that the responsibilities have currently been divided between the Federal Minister for Power, Petroleum & Natural Resources, Omar Ayub, and the advisor to PM on petroleum products, Nadeem Baber.
Nadeem Babar, sources maintain, is accessible more than others and has a business savvy,”go get ” attitude but he alone is unable to break the log jam, inertia and decision paralysis in Islamabad.
read more:Pakistan’s Painful Economics, What more the IMF expects?
PSO Acting CEO & CFO on ECL?
The sources, inside the PSO, said that PSO does not have a permanent CEO or MD; it is being run by an acting managing director, Jahangir Shah, who is reportedly a cousin of the ex-petroleum minister Naveed Qamar and was perhaps appointed in PSO during the Pakistan Peoples Party tenure.
Ironically, the sources said, both the MD, Jehangir Shah, and CFO, Yaqoob Sattar, are facing different enquirers and have been placed on the Exit Control List (ECL) for various reasons. “The organization is dysfunctional,” an official said, “it has to find a fully functional CEO/MD.”
Surprisingly, it has emerged, while PSO board had decided to bring in a professional expert as permanent CEO, government has not been able to give even this advertisement because of a different dysfunction in Islamabad. The Establishment division issued a notification on March 28, making it mandatory that there will be a selection board in every ministry to nominate people for the appointment in the important public-sector organizations – that includes PSO. These selection boards have to nominate 3-5 suitable names for the approval of Prime Minister.
The ministers, head the five-member boards as chairman, they will nominate the four other members of the boards as per the notification – making the selection boards highly political in nature. Even PSO’s own board has six members from the government out of a total of 10.
Apparently the selection board in Islamabad, under the ministry, suffers from its own decision paralysis therefore no one has so far been nominated (after the advertisement and selection process) for the post of PSO’s CEO, it has further added to the problems already being faced by PSO.
The experts opined that PSO’s functioning will be adversely affected if it continues to borrow more over Rs. 100 billion from the market as the interest rates have been increased because of the devaluation of rupee against dollar and expected to raise more after the budget. Curreenty interest rates are around 12.5% or more.
If it had all its receivables, sources privy to the developments argue, PSO could grow into a large national conglomerate diversifying into other industries, including up and middle stream oil businesses.
The experts said that this is crisis-like situation and the PM Imran Khan-led government need to come up with a solution as soon as possible.