Transport crisis threatens to disrupt economic activity, supply chains

The economists and business experts have warned that the nationwide suspension of goods and oil transportation could create serious disruptions across Pakistan’s supply chains if the dispute is not resolved quickly, adding that prolonged interruption in cargo movement would increase operating costs, disrupt industrial production and put further pressure on exports.

Experts said the ongoing situation should not be viewed merely as a dispute between transporters and the government, as the uninterrupted movement of goods is essential for manufacturing, agriculture, wholesale and retail trade, imports, exports and the distribution of essential commodities.

They said the suspension of a large portion of the country’s freight fleet could create a chain reaction across the economy. Factories dependent on regular supplies of imported and locally produced raw materials could face interruptions, while manufacturers with completed consignments could experience difficulties in moving goods to ports, warehouses and domestic markets.

According to economic experts, any prolonged disruption in freight movement could raise costs at multiple stages of the supply chain, ultimately increasing prices for businesses and consumers.

They urged the government to give immediate priority to negotiations with transport representatives and ensure restoration of normal cargo movement, while simultaneously addressing the structural issues that have contributed to growing tensions in the transport sector.

Experts said the introduction of daily petroleum price adjustments had added another layer of uncertainty to an already difficult operating environment. Fuel represents a major component of freight costs, and daily changes make it difficult for transport operators to determine charges for journeys that may take several days.

The resulting uncertainty also affects manufacturers and traders because businesses cannot accurately forecast the cost of moving raw materials and finished products. For exporters, the issue is particularly significant as freight costs are often incorporated into orders and contracts agreed weeks or months before shipment.

Economists said Pakistan needed a petroleum pricing framework that reflected international market movements while providing sufficient predictability for businesses. They noted that frequent changes in fuel prices could complicate production planning, inventory management and commercial contracting.

They further cautioned that heavy reliance on petroleum taxes and levies could become counterproductive if it substantially increased transportation and production costs. Higher fuel prices raise the delivered cost of raw materials, machinery, food products and finished goods and also increase the cost of moving agricultural inputs and crops between production areas and markets.

According to experts, the current disruption has also exposed weaknesses in Pakistan’s logistics infrastructure. The country needs better freight facilities, rationalised toll charges, adequate parking for heavy vehicles around ports and industrial zones, streamlined licensing procedures and a taxation framework that does not place excessive pressure on formal transport operators.

They stressed that logistics costs should be considered an integral part of Pakistan’s export strategy. Export competitiveness depends not only on the cost of manufacturing a product but also on the expense and reliability of moving raw materials to factories and finished goods to ports.

Experts said Pakistani exporters already face intense competition from regional economies where supply chains are becoming more efficient and predictable. Any additional increase in domestic transportation costs could further reduce the price competitiveness of Pakistani products in international markets.

They recommended establishing a permanent consultation mechanism involving transporters, chambers of commerce, manufacturers, exporters, oil-sector representatives and relevant government agencies. Such a platform could identify emerging problems and develop solutions before individual disputes escalate into economy-wide disruptions.

Economists also called for a review of withholding tax arrangements affecting goods transporters, saying the taxation system should encourage formalisation, investment and expansion of the logistics sector rather than create additional working-capital pressures.

They said all transport-related taxes, tolls, fees and regulatory charges should be reviewed collectively to determine their overall impact on freight costs.