Pakistan Unlikely to Meet $60 Billion Export Target: PBC
- Sara Habib
- February 6, 2025
- 9:43 am
- 56
- Current Affairs
Gas Price Impact: Pakistan's Export Challenges
Gas price increase threatens Pakistan’s export goals. The Pakistan Business Council (PBC) has expressed concerns about this issue. Recently, the government doubled gas prices for industries, significantly raising costs. These changes will likely hurt the country’s manufacturing sector and export competitiveness.
PBC stated that gas costs for captive power plants have risen sharply. The rate jumped from Rs. 2,400/mmbtu (or US$ 8.8) to Rs. 4,200/mmbtu (US$ 15). This price is more than double what industries in Bangladesh pay. Electricity tariffs in Pakistan are also very high. They stand at 17 cents/kWh compared to 6–10 cents/kWh in regional competitors like India and Vietnam.
More than half of Pakistan’s exports depend on gas-powered captive plants. These facilities create jobs and reduce reliance on imports. However, the higher gas prices are making manufacturing less attractive for investors. As a result, achieving the government’s $60 billion export target by 2027 is unlikely.
The timing of this increase is problematic. The USA has imposed tariffs on Chinese imports, leading to a shift in global orders. Countries like India, Bangladesh, and Vietnam are poised to benefit. Pakistan, with its higher energy costs, may miss out on this opportunity.
Industries that rely on captive power are now under pressure. Some cannot switch to the grid quickly due to high infrastructure costs. Others have already invested in captive systems and now face extra levies. This uncertainty makes industrial growth and job creation more challenging.
The energy shift also poses risks for local gas companies. If industries reduce gas usage, companies like SSGC and SNGPL could lose high-paying customers. The burden may then fall on domestic consumers or the government. Both options come with economic and political challenges.
In the short term, these price hikes could increase reliance on imported solar and alternative energy equipment. This would lead to further outflows of foreign exchange.
PBC has urged the government to reassess these policies. Without adjustments, the higher energy costs will hurt export growth and the broader economy. Competitive energy pricing is crucial for Pakistan’s industrial and export success.
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