Businesses warn of factory closures, rising costs, job losses as fuel hike strains industry, SMEs, agriculture

Pakistan’s business community has called for an economic emergency and demanded a temporary suspension of the petroleum development levy (PDL) following a sharp increase in fuel prices, warning of rising production costs and weakening export competitiveness.

Industry representatives said the increase in petroleum prices, linked to global oil market volatility amid Middle East tensions, has created operational challenges for manufacturers and could lead to reduced production, factory shutdowns and job losses.

The Federation of Pakistan Chambers of Commerce and Industry said higher fuel costs would significantly raise freight and transportation expenses, increasing overall production costs across key sectors, including textiles and manufacturing.

Officials said the impact would extend beyond industry, with rising transport costs expected to push up prices of essential goods, affecting labourers and salaried groups.

Business leaders also flagged risks to agriculture, noting that higher diesel prices could make the use of tractors, tube wells and harvesters unaffordable during the harvesting season, potentially affecting crop output.

Small and medium enterprises were identified as particularly vulnerable, with limited financial capacity to absorb rising costs, raising concerns about liquidity pressures and business continuity.

Industry representatives said targeted subsidy measures under consideration may not provide sufficient relief, citing implementation challenges and limited impact in previous instances.

They also pointed out that fuel price increases in Pakistan have been significantly higher than in regional economies such as India, Bangladesh, China and Vietnam, affecting competitiveness.

Separately, representatives from industrial associations warned that higher energy costs could slow economic activity and discourage investment, with potential implications for capital flows.

Business groups urged the government to review its pricing decisions, reduce fiscal pressures through expenditure controls and consider alternative energy sources to support industry and stabilise costs.