News Brief
Pakistan’s Exporters Struggle As Gas Prices Nearly Doubles, Making Industries Uncompetitive Against India, Vietnam And Bangladesh
Children in a village in Sindh, Pakistan. (Photo by Dan Casperz via flickr)
Pakistan’s export sector is facing a major setback after the government doubled gas prices for in-house power generation, making industries less competitive globally, according to the Pakistan Business Council (PBC), reported The Hindu.
The policy shift threatens Pakistani Prime Minister Shehbaz Sharif’s goal of increasing exports to $60 billion by 2027, as manufacturers struggle with soaring costs.
Gas Price Hike and Special Levy Impacting Industries
The Economic Coordination Committee (ECC) recently raised gas prices for captive power plants (CPPs) by 18 per cent, directly increasing production costs for export-driven industries.
Adding to the burden, the government imposed a special levy of up to 20 per cent in four phases, with the first 5 per cent levy coming into effect on 2 February.
By August 2026, the total levy will push gas prices from Rs 2,400 per mmBtu ($8.8) in November 2023 to Rs 4,200 per mmBtu ($15).
At this rate, gas costs for Pakistani manufacturers will exceed those in Bangladesh and potentially surpass global re-gasified liquefied natural gas (RLNG) rates, the PBC warned in a letter to the Prime Minister.
With over 50 per cent of Pakistan’s export volume relying on gas-powered captive plants, the manufacturing sector is now viewed as one of the least attractive for investment and expansion, the PBC cautioned.
While Finance Minister Muhammad Aurangzeb defended the move, stating that only 1,100 out of 5,600 industrial gas connections are for CPPs, industry leaders argue that making gas unaffordable is a de facto disconnection that hurts exports and job creation.
IMF Conditions and Future Economic Challenges
The International Monetary Fund (IMF) had initially demanded a complete disconnection of gas supply to industries paying below imported gas prices.
The government renegotiated, choosing to keep supplies intact but raise costs to unsustainable levels. The Finance Ministry sees this policy as a key step toward meeting IMF’s loan conditions, which also include new agricultural income tax reforms.
Missed Trade Opportunities
The PBC noted that the US decision to impose tariffs on Chinese imports could have benefited Pakistan, allowing it to capture diverted export orders. However, with higher gas prices making Pakistani goods less competitive, rival nations will likely absorb these opportunities instead.
