ISLAMABAD: With Pakistan State Oil`s (PSO) receivables touching about Rs280 billion, the government has decided to immediately release Rs20bn to the state-owned company to help it avoidinternationaldefaults.

A senior government official told Dawn the country`s largest oil supplier had warned the government of its looming international defaults, exhaustion of its credit limits and resultant looming crisis of fuel supplies starting from furnace oil and other petroleum products to liquefied natural gas (LNG)imports.

PSO earlier demanded an immediate provision of Rs50bn through banks or the budgetary injections.

A series of meetings at the Ministry of Finance attended by top officials of the ministries of petroleum, and water and power and PSO finally concluded that the finance ministry should give PSO an upfront amount of Rs20bn out of its allocations for power sector subsidies.

At the same time, the Ministry of Water and Power was allowed to arrange another Rs30bn through term finance certificates from the banking sector backed by government guarantees. A part of these loans would also be rerouted through the power sector companies to PSO.

The state-owned company previously told the government that supplies of allpetroleum products, including jet fuels, furnace oil, petrol and high-speed diesel, and even LNG were at the verge of collapse due to long-standing huge receivables led by the power sector. It had reported continuous defaults by the power sector as its total dues touched Rs247bn last week.

This was despite government claims thatit had controlled energy shortages, reduced losses and improved recoveries overthe pastthree years.

This was the highest amount of receivables in the accounts of the country`s largest fuel supplier that peaked to Rs220bn in May 2013 before the government cleared the amount through a controversial scheme of cash payments and book adjustments.

The PSO`s management has repeatedly written to the ministries of water and power, petroleum and finance about its difficult financial position in recent weeks and sought proactive support.

The government did not pass on two consecutive reductions in consumer tariff determined by the power regulator for fiscal years 2015 and 2016 as it facilitated the 10 distribution companies to seek stay orders from the Islamabad High Court.

The power sector`s receivables posted a 66 per cent increase in receivables despite a 27pc cut in generation cost, better energy mix and purported improved governance.