Industrial collapse in Pakistan: calls grow for immediate economic emergency

Pakistan’s industrial sector is facing what business leaders describe as a systemic and potentially irreversible collapse, prompting urgent calls for the government to declare a nationwide industrial emergency. Warnings from major trade bodies, including the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the All Pakistan Textile Mills Association (APTMA), point to soaring energy costs, punitive taxation, and tight monetary policy as the main drivers pushing industry to the brink.

FPCCI President Atif Ikram Sheikh has cautioned that Pakistan’s manufacturing base is no longer dealing with a routine slowdown but a structural breakdown. According to FPCCI, regionally uncompetitive electricity and gas tariffs, excessively high interest rates, and a restrictive tax regime have made it nearly impossible for Pakistani industries to compete with regional peers such as India, Bangladesh, and Vietnam.

Electricity costs remain the most critical pressure point. While official claims put industrial power tariffs at around Rs22 per unit, exporters report actual billed rates of Rs34–35 per unit, translating to approximately 12.5 cents per unit. In contrast, competing regional economies offer electricity in the range of 6 to 9 cents per unit. Industry representatives say this disparity has already resulted in rapid de-industrialization, closure of hundreds of units, and growing capital flight to more business-friendly countries.

The gas tariff for industry has emerged as another major obstacle. Currently priced at around Rs3,900 per MMBTU, FPCCI and APTMA have jointly demanded a reduction to approximately Rs2,400 per MMBTU, warning that without immediate relief, production will continue to shut down. Business leaders also argue that industries can no longer bear the burden of cross-subsidies embedded in energy pricing, calling it a “hidden tax” that subsidizes inefficiencies elsewhere at the cost of national productivity.

The textile sector, Pakistan’s largest export earner, is at the center of the crisis. FPCCI estimates that more than 100 textile mills have already shut down, while APTMA places the number closer to 150. Remaining units, particularly in Faisalabad, are reportedly operating at minimal capacity or preparing for closure. Textile exports have declined sharply, raising alarms about foreign exchange earnings and employment.

These concerns were echoed at a joint press conference in Faisalabad, chaired by APTMA Chairman Kamran Arshad and attended by representatives from multiple industrial associations. APTMA demanded the declaration of a nationwide “textile emergency,” calling for immediate fixing of electricity tariffs at 9 cents per unit and gas prices at internationally competitive levels. Speakers warned that the industry has been flagging the unsustainability of current energy costs for over a year and a half, but no effective corrective action has followed.

Monetary policy has also come under strong criticism. With the policy rate currently at 10.5 percent, industry leaders argue that high interest rates have created a severe liquidity crunch, stifled private-sector credit, and halted industrial expansion. FPCCI has urged the State Bank to reduce the policy rate to 9 percent in the upcoming Monetary Policy Committee meeting, with a gradual reduction to 6 percent over subsequent meetings.

The crisis is spilling over into allied sectors as well. Stagnation in the real estate sector has reportedly affected around 40 associated industries, compounding job losses and slowing economic activity. Business leaders warn that rising unemployment is becoming a serious social risk, arguing that infrastructure projects and urban development have little meaning without productive jobs.

Criticism has also been directed at power sector policies. Industrialists oppose any further electricity price hikes and claim that a subsidy burden of around Rs270 billion is effectively being recovered from industries. Losses of power distribution companies and high capacity charges are being passed on to industrial consumers, despite an installed generation capacity of around 43,000 MW. This, they argue, reflects deep structural flaws in the energy sector rather than genuine supply constraints.

On taxation, FPCCI has demanded a reduction in industrial income tax from 39 percent to 20 percent and a cap of 15 percent on income tax for the salaried class. Other proposals include shifting independent power producers (IPPs) to a take-and-pay model, immediate clearance of pending sales tax refunds under the Export Facilitation Scheme, and downward rationalization of overall taxes.

The Special Investment Facilitation Council (SIFC) has been urged to intervene and coordinate a multi-pronged industrial recovery framework. Industry leaders warn that without swift and decisive action, Pakistan risks accelerating de-industrialization, surging unemployment, declining exports, and a worsening balance-of-payments crisis.

As Faisalabad Chamber President Farooq Yousaf noted, questions are increasingly being raised about whether Pakistan is being pushed toward an import-dependent economic model. Others criticized the promotion of industrial exhibitions while factories continue to shut down and highlighted the excessive regulatory burden of dealing with over 30 government departments.

The message from industry is blunt and unified. Without immediate tariff rationalization, tax relief, and supportive monetary policy, Pakistan’s industrial base may suffer long-term damage. As business leaders summed it up, this is no longer a debate about incentives or temporary packages, it is a question of industrial survival versus collapse.