29-08-01 Kuwait, a regular supplier of 3 mm tpy of high speed diesel (HSD), has sought Pakistan government guarantees to provide oil on interest free credit to PSO, and the ECC is likely to approve these guarantees. The Petroleum Ministry has also agreed to four more conditions put forward by the KPC and has now sought the formal approval of the ECC.

According to a copy of the KPC letter sent to the GoP, the KPC has stated these terms for supply of oil to PSO:
(i) the Ministry of Petroleum agree to continue the import of gas oil 1 % sulphur from KPC until end June 2002;
(ii) 90 days interest free credit period shall consist of the current 30 days period from the relevant bill of landing date with an additional period of 60 days, making 90 days in total;
(iii) 90 days interest free credit period shall only apply for the period during which gas oil 1 sulphur is imported from KPC;
(iv) the government of Pakistan shall continue to guarantee the payment obligations of the buyer of KPC Gas oil supplied into Pakistan.

Following is the text of the summary moved by the Petroleum Ministry to the ECC:
1) Our present annual import requirement of high speed diesel (HSD) is around 5 mm tons out of which 3 mm tons is imported from KPC under term contract. KPC on the government of Pakistan (GOP) request extended credit facility from 30 to 90 days on their supplies from 1st September, 2000. The contract of KPC with GOP remained at 31st December, 2000. Thereafter in the anticipation of de-regulation/outstanding of imports, PSO was authorised to negotiate and finalise term contract with KPC for supply of HSD.
KPC had agreed to continue 90 days credit to Pakistan subject to the condition the government shall guarantee the payment obligation of the buyer (Annex-I). The matter was taken up with the Finance Division, which informed that under short term borrowing restrictions, the GOP guarantee cannot be given. Accordingly, PSO was advised to impress upon KPC to do away with the need of government guarantee. KPC did not agree to waive the condition of guarantee and reiterated to furnish the same on the prescribed format (Annex-II) before formal agreement is executed with PSO.
2) The matter was again referred to Finance Division that has agreed in principle to give the requisite guarantee to KPC subject to approval of the ECC (Annex-III).
Ministry of Petroleum and Natural Resources, therefore, recommends that KPC being strategic and competitive source of supply may be provided with the GOP guarantee for PSO payment obligation to avail 90 days credit so as to accordingly execute Product Supply Agreement effective 1st January 2001.
3) Approval of the ECC is solicited to the proposal contained in paragraph 2 above;
4) The minister for petroleum and natural resources has seen and authorised submission of the summary.