By Katharine Houreld
ISLAMABAD Feb 21 (Reuters) - Pakistan State Oil may default
on payments due this month unless state-run companies at least
partially pay for their oil, a spokeswoman said on Thursday,
putting energy supply at risk and threatening increased
blackouts ahead of key elections.
The country's largest energy company said last week it would
be dramatically cutting back on the amount of oil companies can
buy on credit, an action that would worsen already daily power
The power shortages have sparked violent protests and
crippled key industries, costing hundreds of thousands of jobs
in a country already beset by high unemployment, poverty and a
Pakistan State Oil is owed $1.5 billion, mostly by the
government electricity companies but also by the state airline
and railways. It owes suppliers $1.23 billion.
Around two-thirds of Pakistan's energy is generated by oil
and gas. There are also widespread gas shortages.
Pakistan State Oil said it had received payments of $200
million this month but needed another $250 million within a week
to pay its creditors.
"We have a liquidity crisis and we need funds urgently to
keep the wheels going. In case - god forbid - we can't pay the
banks or our suppliers, it will be a problem for Pakistan,"
spokeswoman Mariam Shah told Reuters. "We supply the airlines,
we supply the defence forces, the government. If they start
paying us on time, this kind of crisis would never ever emerge."
The power cuts typically become far worse in the sweltering
summer months when fans and air conditioners are turned on full.
Elections are expected to be held in late spring and the
dismal performance of the state-run power sector has been a
repeated complaint from voters.
The cuts are the result of government-imposed rules that
mean electricity companies must sell power below the cost it
takes to generate it. The cash-strapped government is supposed
to compensate the companies for the money they lose but only
makes late and partial payments.
The problem is exacerbated by wealthy or influential
consumers, including most government agencies, who refuse to pay
huge utility bills for their homes and factories.
The power companies then cannot pay suppliers like Pakistan
State Oil for the fuel they use.
"This lack of payment has brought the nation's largest and
most profitable public company to its knees and may consequently
lead to a breakdown in the oil supply chain which will result in
increased blackouts and load-shedding across the country," the
company said in a statement last week.
The Ministry of Petroleum and Natural Resources had appealed
to the government to release extra funds, said spokesman Irfan
"We have asked the Finance Ministry to release some of the
amount to PSO so they could be saved from default," he said.
"The Finance Ministry has been releasing funds piecemeal."
(Reporting By Katharine Houreld; Editing by Nick Macfie)