The Auditor General of Pakistan (AGP) has uncovered audit observations worth Rs669.302 billion against Pakistan State Oil (PSO) for FY2023-24, with Rs472.033 billion identified as recoverable. The audit highlights serious concerns over financial management, governance, procurement practices, operational safety, and legal compliance at Pakistan’s largest oil marketing company.
AGP Flags Massive Recoverable Amounts
According to the audit report for 2024-25, PSO faces significant financial challenges stemming from weak internal controls and delayed recoveries. The largest audit observation relates to Rs467.708 billion in outstanding receivables from bulk consumers, retailers, and other entities.
The AGP noted that delayed recoveries forced PSO to rely heavily on bank borrowings, increasing the company’s financing costs by approximately Rs12.557 billion during the financial year.
Outstanding Receivables Continue to Fuel Circular Debt
The audit revealed that trade debts stood at Rs439.430 billion as of June 30, 2024.
Among the major outstanding amounts were:
- Rs25.805 billion overdue from retailers despite advance payment requirements.
- Rs2.068 billion receivable from the Pakistan National Shipping Corporation (PNSC).
- Significant unpaid dues from power sector entities.
The audit attributed the situation to management weaknesses, while PSO informed auditors that it had recovered around 81 percent of the flagged amount. The Departmental Accounts Committee (DAC) directed the company to continue recovery efforts.
Delayed Payment Surcharges Not Recognized
The AGP also highlighted that PSO did not execute a tripartite agreement with SNGPL and SSGC, resulting in the non-recognition of Rs176.125 billion in delayed payment surcharges, including Rs78.577 billion relating to FY2023-24.
Meanwhile, the company incurred Rs39.774 billion in financing costs due to delayed recoveries, reflecting the ongoing impact of Pakistan’s circular debt crisis on the energy sector.
Audit Highlights Weak Internal Controls
The report also pointed to internal control failures involving Rs243.746 million in irregular transactions conducted through PSO fuel cards.
Auditors identified unusually large transactions and weak security controls, raising concerns over fraud risks. The matter has been referred to the Federal Investigation Agency (FIA), while PSO reported that partial recoveries have been made and certain amounts have been withheld pending investigation.
Governance Concerns Remain
The AGP concluded that persistent weaknesses in receivables management, financial controls, and governance continue to expose PSO to higher financing costs and operational risks.
The audit recommends stronger internal controls, faster recovery of outstanding dues, improved oversight, and enhanced compliance measures to safeguard public resources and improve the company’s financial health.