Aug 16 - 22, 20

People sighted the moon of the holy month of Ramadan coincidently falling in August which is the month of the creation of Pakistan, with tears rolling out of their eyes because the dreams of peace, happiness and freedom associated with the creation of Pakistan remain merely dreams even after over six decades of independence.

However, despite all difficulties, sufferings, and hardships, people are rightly determined to celebrate the Independence Day with all zeal and fervour as the value of freedom cannot be overestimated in any way.

Contrary to the dreams of socioeconomic and political sovereignty, people are suffering probably the worst kind of energy crisis, frequent load shedding even during the month of Ramadan, double digit inflation that has reduced the purchasing power of the middle average income groups while ever increasing law and order and street crimes primarily due to rising rate of unemployment are serious causes of concern for the entire country.

This year the Ramadan has come at a time when the entire nation is reeling under constant pressures on one account or the other, be that may suicide bombing by terrorists, target or sectarian killings, rages by flood or tragic air crash and extreme economic inflationary pressures raising the poverty level. But above all the most dangerous threat being faced is the fast evaporating nationalism as people now give more importance to their party flag rather than national one. They take pride in their provincial identity than being called a Pakistani. This is something very danger.

Due to lack of direction people have devised their own goals and are running after personal gains. Recent target killings in Karachi were horribly ugly and painful for the law abiding citizens. If the leadership is developed by the divine power, it is the time that nation is looking for a savior to convert this fragmented cohorts in to a nation.

The ravages of flash floods are being measured as more severe than the devastations caused by Tsunami a few years back. However, the losses to different segments of the economy could be measured in exact terms only after the swirling flood will subside.

It is interesting to note that there was also a positive aspect of the flash flood, which perished hundreds of precious lives and displaced millions of households besides causing paralyzing effects on the agriculture economy and that is provision of opportunity to Wapda to generate hydropower at full capacity and reduce cost of thermal power generation.

The hydropower generation can minimise the reliance on thermal means and lower average power cost that can be shared with the inflation hit people of this country.

It may be noted that the heavy rains and flash floods have badly affected the gas distribution systems of Sui Southern Gas in the areas including Khandhkot and Ghouspur Towns and their en-route villages in district Kashmore, Hamayoon/Jagan, and Mian Jo Goth in district Shikarpur while district Jacobabad, Mubarakpur and Mirpur Buriro villages and Thul town with its en-route villages are also the affected.


Like Asian Development Bank (ADB) which has linked release of $500million for budgetary support with the settlement of energy issue of inter-corporate debt, the IMF may follow suit in its upcoming review for release of next tranche by the end of this month.

The government is currently in preparation of a working paper that is linked with the settlement of the energy debt, which bodes well for PSO and other energy companies.

It may be recalled that the government had earlier committed with the IMF to provide a clear strategy for the settlement of the inter-corporate debt issue. Sources expected high possibility of the government presenting the working paper for settlement of the corporate debt issue in the upcoming IMF review sometimes this month.

The inter-corporate debt especially in the energy sector is causing adverse impacts on the liquidity health of fuel suppliers, power producers and utilities yet it helped positively to strengthen income of PSO with the interest income reportedly to the tune of Rs10 billion from power generating companies besides inventory gains which are taken as a pleasant surprise for the largest fuel supply company in the country.

According to informed sources, PSO's outstanding interest income on overdue receivables is estimated at Rs10 billion while interest expense on overdue payable to one of the suppliers i.e. Pak Arab Refinery is five billion rupees.

Sources said that due to tax treatment, PSO booked interest income on cash basis while interest expense is recorded on accrual basis. In fourth quarter of financial 2010 alone, interest income of Rs1.6billion was received on overdue receivables from IPPs. While the amount is less than what PSO has received in the last two quarters i.e. Rs2.1billion and Rs2.2billion respectively, sources added. It is learnt that interest income coupled with inventory gains were positive surprises, however, one-off tax adjustment offsets the impact.

In financial year 2010, PSO received Rs5.7 billion as compared to Rs380 million in financial year 2009 in the form of interest income from IPPs while the company booked/paid Rs7.6bn interest cost on overdue payables.

Actually, FY10 has proved to be yet another year of strong volume jump that was led by furnace oil while drop in diesel sales of 10 per cent was a bit concerning and linked with PSO's liquidity issues. However, PSO has exhibited impressive cost control in financial year 2010 as op-ex is down three per cent despite 11.9 per cent CPI in Pakistan. This is also encouraging in the backdrop of eight per cent volume growth of PSO earnings.