KARACHI: Pakistan State Oil, the country’s largest oil marketer, says it is in talks with the government on a plan to acquire stakes in public sector energy companies and offset mounting debt it is owed by firms such as the national airline.
Stopping the pile-up of unresolved debt across Pakistan’s power sector, and ultimately settling it, is a top concern of the International Monetary Fund (IMF), with which Islamabad begin talks this month for a new long-term loan deal.
“Everything will be done through competitive bidding and we will participate and if we win, the stakes will be offset against (PSO’s receivables),” said Syed Muhammad Taha, the managing director and chief executive of state-backed PSO.
“That is our proposal and this is under consideration, so we are working with the government,” Taha said in an interview on Wednesday with Reuters, which is the first to report the plan.
Pakistan’s government, with a stake of about 25 percent, is the biggest shareholder of PSO, but private shareholders own the rest.
Government officials, including the petroleum minister and the information minister, did not reply to a Reuters request for comment.
Total circular debt in Pakistan’s power and gas sectors stood at 4.6 trillion rupees ($17 billion), or about 5 percent of GDP by June 2023, the IMF says.
Circular debt is a form of public debt that stems in part from failure to pay dues along the power sector chain, starting with consumers and moving to distribution companies, which owe power plants, which then have to pay fuel supplier PSO.
The government is either the biggest shareholder, or outright owner of most these companies, making it tough to resolve debt as fiscal tightening leaves it strapped for cash.
Among other steps sought by the IMF, Pakistan has raised energy prices to stop the build-up of debt. But the accumulated amount still has to be resolved.
Taha said the IMF reforms helped the sector by boosting creditors’ ability to pay, which will continue to improve.
PSO’s aggregate receivables from government agencies and autonomous bodies stood at 499 billion rupees ($1.8 billion), the largest share owed by gas provider Sui Northern Gas, whose largest shareholder is the government.
PSO’s annual report last year said the crisis of owed debt was a serious issue for it.
Taha said PSO had initially floated the idea of acquiring stakes or complete ownership of assets such as power plants in Nandipur in the northern Punjab province and Guddu in southern Sindh, as well as the government-owned holding entity for power generation companies.
It also discussed equity stakes in profitable public sector companies such as the Oil and Gas Development Co, he added.
PIA DEAL
Taha said PSO was also a part of the broader settlement framework for the privatization of Pakistan International Airlines, which would potentially include a “clean asset swap” and a stake in the airline’s non-core assets, such as property.
The government is putting on the block a stake ranging from 51 percent to 100 percent in debt-ridden PIA as part of the public-sector reforms sought by the IMF.
In March, media said the principal alone that PIA owed PSO for fuel supply amounted to roughly 15.8 billion rupees ($57 million).
Taha added that he expected modest growth in demand for petroleum products as the economy opens up, thanks to lower interest rates and higher disposable income.
As economic conditions improve, he added, PSO is working with big strategic investors from China and the Middle East to upgrade and expand its refinery arm, Pakistan Refinery Ltd.
PSO has a network of 3,528 retail outlets in addition to 19 depots, 14 airport refueling facilities, operations at two seaports, and Pakistan’s largest storage capacity of 1.14 million tons.

BEIRUT: An Israeli air strike on a car in southern Lebanon killed four people on Thursday, according to Lebanon’s civil defense, with security sources saying those killed were members of armed group Hezbollah.
The conflict between Hezbollah and Israel has rumbled on since October in parallel to the Gaza war, with an escalation this week as both sides intensified their bombardment, fueling concern of a bigger war between the heavily-armed adversaries.
Israel has used artillery, drones and warplanes against targets in southern Lebanon, including to strike fighters from Hezbollah and other armed groups. Fighters in Lebanon have launched rockets and their own drones into northern Israel.
The Israeli military did not immediately reply to a request for comment on Thursday’s strikes.
Lebanon’s civil defense rescue force said it had pulled four bodies out of a car that had been scorched by an Israeli strike. Two security sources told Reuters the four killed were members of Hezbollah.
The exchanges of fire have uprooted tens of thousands of people on both sides of the border. In northern Israel, the displacement has prompted calls for firmer military action against Hezbollah.
Israeli Defense Minister Yoav Gallant warned on Wednesday that the next months “may be a hot summer,” saying either a diplomatic deal or military solution was needed to restore security.
The fighting between Israel and Hezbollah has been the most intense since they went to war in 2006.
Hezbollah has repeatedly said that it will cease fire when the Israeli offensive in Gaza stops, but that it is also ready to fight on if Israel continues to attack Lebanon.