By SKM
October 7, 2025
ISLAMABAD: Pakistan’s key export industries are on the brink, not due to global headwinds but because of flawed domestic energy policies. The All Pakistan Textile Mills Association (APTMA) has issued a stark warning: the government’s failure to ensure regionally competitive electricity and gas tariffs is driving deindustrialization, stalling exports, and pushing the economy toward a deeper crisis.
Despite government commitments to reduce industrial electricity rates to 9 cents/kWh by April 2025, the opposite has occurred. Tariffs rose to 11.6 cents/kWh in August, up from 10.4 cents in May. This is significantly higher than rates in India, Bangladesh, Vietnam, and China — all of which provide electricity to their industries at 5–9 cents/kWh. APTMA calls this pricing regime “economically irrational” and “fiscally unsustainable.”
A major contributor to the crisis is the government’s imposition of a gas levy on captive power generation. Designed to raise Rs. 105 billion, the policy backfired. Industrial gas demand collapsed, and many units were forced to shut down highly efficient Combined Heat and Power (CHP) plants. Those trying to switch to grid electricity faced poor supply quality, voltage fluctuations, frequent outages, and expensive infrastructure upgrades — making grid reliance both unreliable and unaffordable.
Many industrial units, APTMA notes, still lack proper grid access and depend solely on gas. With RLNG prices set at $16/MMBtu while domestic consumers receive it at subsidized rates of $8/MMBtu, industries are effectively being priced out. The result is not only production losses in the billions but growing frustration over policy incoherence.
The broader energy sector is under strain as well. Pakistan’s gas circular debt has surged past Rs. 2.6 trillion. The state-owned OGDCL has projected losses exceeding $378 million, while investor confidence has plummeted — evidenced by the failure to attract bids for 22 out of 23 oil and gas exploration blocks in the latest licensing round.
APTMA also criticized the continuation of surcharges and cross-subsidies that disproportionately burden industry. The Rs. 3.23/kWh circular debt surcharge, initially introduced as a temporary measure, has been extended for another six years. Industrial users now pay significantly more than the actual cost of service — estimated at 8–9 cents/kWh — just to keep subsidies flowing to other consumer groups.
Rooftop solar adoption is further complicating the situation. More middle- and high-income households are reducing their grid consumption through solar, yet still qualify for subsidized slabs based on their lower monthly usage. This shifts more of the cost burden onto industrial and commercial users, creating what APTMA calls a “utility death spiral” — rising tariffs drive more defections from the grid, leaving fewer paying consumers to shoulder a growing financial load.
APTMA also expressed deep concern over the flawed rollout of the Competitive Trading Bilateral Contract Market (CTBCM), which was meant to liberalize the power market. With wheeling charges at Rs. 12.55/kWh and a cap of just 800MW, the system remains largely inaccessible to most industries. Even those trying to source bilateral power are penalized with marginal cost pricing on hybrid consumption.
Meanwhile, exporters are reeling under multiple burdens — double taxation, delayed tax refunds, high interest rates, and growing regulatory harassment. Countries like India and Bangladesh, when confronted with global trade challenges, responded by slashing energy costs and streamlining taxes. Pakistan has done the opposite — raising costs and increasing uncertainty.
Despite the grim outlook, APTMA believes recovery is still possible if urgent action is taken. The government must lower electricity tariffs to match regional benchmarks, eliminate unfair surcharges, allow non-discriminatory access to gas at actual RLNG cost, and end pricing distortions that penalize efficient industrial operations.
“The textile industry alone has the capacity to export $25 billion annually,” APTMA stated. “But that potential cannot be realized unless the government enables industry to compete on a level playing field.”
The association insists this is not about special treatment — it is about economic survival. Without energy reforms, Pakistan risks losing its place in global value chains, watching investment disappear, and facing long-term stagnation just as regional competitors pull ahead.
“Support industry — or watch the economy unravel,” APTMA warned.Ends
