Vitality, excessive charges stifle funding

Federation of Pakistan Chambers of Commerce and Business (FPCCI) President Atif Ikram Sheikh has referred to as on the federal authorities to right away declare an “industrial emergency,” warning that Pakistan’s manufacturing sector is going through a systemic and probably irreversible collapse resulting from uncompetitive power tariffs, excessive rates of interest and a restrictive tax regime.

Chatting with The Specific Tribune, Sheikh mentioned Pakistani industries are working at a extreme drawback in comparison with regional opponents, primarily resulting from hovering power prices. “In Pakistan, industries are paying round 13 cents per unit of electrical energy, whereas in neighbouring international locations, power prices vary between seven and eight cents. Our power is nearly double what our opponents are paying,” he mentioned, including that this disparity has eroded the competitiveness of native producers in world markets.

Sheikh famous that regardless of having surplus power capability, the excessive value of energy continues to cripple each current and new industries, together with textiles, vegetable oil and different manufacturing sectors. He reiterated that the FPCCI had rejected incremental reduction packages, stating that no industrial client had obtained electrical energy on the promised Rs22 per unit, whereas precise payments proceed to mirror tariffs of Rs34 to Rs35 per unit.

He additionally criticised the nation’s tight financial coverage, stating that persistently excessive rates of interest, hovering between 15% and 16% for a lot of the previous yr, have discouraged non-public funding. “When buyers can earn 15% to 22% risk-free returns by parking cash in banks, why would they put money into companies?” he requested.

Though inflation has eased considerably, with December’s Client Worth Index (CPI) falling beneath 4%, Sheikh argued that rates of interest ought to now be nearer to 7% to stimulate financial exercise.

The impression of those insurance policies has been evident in Pakistan’s export efficiency. Sheikh mentioned exports have proven restricted progress, confined largely to pick sectors equivalent to textiles and surgical devices, whereas total momentum stays weak.

“We have now been caught at an export goal of $30 billion for the final 20 years. Now we’re speaking about $100 billion, however that can require critical coverage corrections,” he mentioned.

The FPCCI president additional highlighted that Pakistani exporters are burdened with electrical energy tariffs of about 12.5 cents per unit, in comparison with 6 to 9 cents in competing economies equivalent to India, Bangladesh and Vietnam. This hole, he warned, has accelerated de-industrialisation, forcing lots of of items to close down and prompting capital flight to extra business-friendly international locations.

Echoing these issues, United Enterprise Group (UBG) Patron-in-Chief SM Tanveer mentioned the textile sector, the spine of Pakistan’s exports, is going through an existential disaster, with greater than 100 mills already closed. He criticised the federal government’s reliance on excessive rates of interest to manage inflation, arguing that the ensuing liquidity crunch has choked private-sector credit score and stalled industrial enlargement.

The FPCCI has demanded a discount in industrial earnings tax from 39% to twenty%, a minimize in fuel tariffs from Rs3,900 to Rs2,400 per mmBtu, and a gradual discount within the coverage charge to six%. The physique has additionally urged the Particular Funding Facilitation Council (SIFC) to intervene, warning that failure to behave swiftly may result in rising unemployment, shrinking exports and a deeper financial downturn.