The Pakistan State Oil (PSO), a government-owned enterprise, experienced a significant drop of nearly 90% in its combined net earnings, amounting to Rs9.82 billion for the fiscal year ending on June 30, 2023.
The decline can be attributed primarily to a notable rise in the expenses associated with the products sold by the company. This situation has heightened its financial risks, particularly in the face of a challenging inflationary backdrop.
The Decline
In the preceding financial year, the overall consolidated profit had reached Rs95.72 billion. In a recent announcement, the oil marketing firm stated that the lingering issue of circular debt continues to be a substantial source of worry, exerting negative effects on its financial well-being.
The firm further informed, “A number of options are under discussion with the government to resolve the issue and reduce the unwarranted onus on PSO’s financials.
In its comprehensive financial report covering the initial nine months (July to March) of the fiscal year 2023, PSO acknowledged that the issue of circular debt remained a prominent and worrisome challenge.
During this period, the receivables owed by Sui Northern Gas Pipelines Limited (SNGPL) recorded a substantial increase of 65% from the figures of March 31, 2022. This rise in outstanding payments led to a noteworthy escalation of PSO’s average borrowings by 157%, consequently causing the finance cost to surge by 995 basis points compared to the corresponding period of the previous year.
The fiscal year 2023 has proven to be a time of fragility and turbulence, both in the global context and within the domestic sphere. Not only Pakistan, but economies worldwide have been grappling with elevated inflation rates and setbacks in growth, which has contributed to heightened financial vulnerabilities.
The petroleum sector has been significantly affected, with white oil sales witnessing a substantial decline of 19.6%, motor gasoline sales dropping by 17.1%, and diesel sales experiencing a notable contraction of 24.9%.
These declines are primarily attributed to reduced economic activities and the simultaneous rise in fuel prices, which has created a challenging environment for the industry.
What’s your take on PSO shrinking profits? Tell us in the comments section.
I believe were people loyal to their home-grown brand, then things may not have been this worse.