Circular Debt Issue Could Cause a Fuel Crisis in Pakistan

Circular debt has spilled over into the entire fuel supply chain for the first time in the history of Pakistan. Reports suggest that ports, refineries, railway bogies, tanker lorries and even storage tanks have all been choked.

A senior official reports, “Fuel storages are full to capacity, movement of tankers and bogies has come to a halt and more than 15 ships full of fuel are waiting at the port for unloading as the power sector struggles to make payments or at least uplift the product.”


And this has occurred even though Pakistan State Oil has canceled the past few import orders.

Furnace oil stocks stand at 800,000 liters, the highest in country’s history and enough for 40 days of consumption. As many as 15 ships are awaiting to be unloaded at the docks and are continuously charging for the stay. Oil companies have reported that the government and the power sector were repeatedly cautioned to manage the situation before a crisis like the current one occured.

Refinery representatives have said that due to the filled stocks, refineries are reducing their capacities. This, in turn, is reducing the production of petrol, diesel, and jet fuels – a perilous omen as the refineries could soon shut down. Commercial planes and defense jets are already running out of fuel.

Non-payments to Independent Power Producers (IPPs) stand at Rs. 414 billion, oil companies are owed over Rs. 300 billion including Rs. 270 billion in receivable of PSO.

In what’s clearly a blame game at this point, petroleum ministry and the finance ministry point towards the power ministry’s mismanagement while the power ministry blames the finance ministry and the power sector regulator citing subsidies and unrealistically low tariffs.

Petroleum minister, Khaqan Abbasi, said that PSO planned the imports based on the power sector’s demands and the power sector’s usage is erratic. They were ordering 16,000-18,000 liters but the power plants were only lifting 8,000-9,000 liters. It is as if the power ministry had no idea on how much fuel is needed even though it was warned that higher gas supply could cause an oversupply.

The issue has been forwarded to NEPRA as well. It is reported that power ministry has asked for Rs. 36 billion on emergency basis to clear this issue. Furthermore, the finance ministry isn’t willing to send out any funds in order to contain fiscal deficit for next year’s budget.

To sum it up, petroleum ministry ordered extra fuel which was beyond its consumption limits and owes too much to pay for it. Oil refineries will shut down if payments are not made within the next few days. And if that happens, we could have a country-wide fuel shortage.

He is the Editor-in-Chief at ProPakistani. Reach out at aadil.s[at]

  • Good for Stocking ” & already makes a History
    Or Khushi Main Bhang Dalane K Liye
    Waiting for Dar Sahab notice for fuel increasing price & he will make again history !

  • They have 40 days worth of stock acquired at old lower rates and yet keep revising prices upward for fuel every 15 days. Baztards.

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