Costly power burden

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Pakistan's industrial sector is suffocating under the weight of exorbitant electricity prices, significantly higher than those in competing economies. At 13.5 cents per kilowatt-hour (kWh) in 2024, the country's energy-intensive industries are paying almost double the electricity costs of manufacturers in China, India and the US, where rates range between 6.3 and 7.7 cents per kWh.

Even in the European Union, where energy prices are traditionally considered high, industrial consumers pay 18% less for electricity than their Pakistani counterparts.

This severe cost disadvantage is eroding Pakistan's export competitiveness at a time when global markets are already challenging. With power making up a substantial portion of production costs, local manufacturers struggle to price their goods competitively. Consequently, Pakistani products lose out to cheaper alternatives from nations with more affordable energy.

This not only stunts export growth but also discourages foreign investment, as industries prefer to operate in countries where input costs are lower and profit margins are higher. The problem is exacerbated by an energy sector plagued by inefficiencies, circular debt and an over-reliance on expensive imported fuels.

Despite frequent tariff hikes, the government has been unable to address the structural flaws that drive up costs. Meanwhile, businesses continue to face erratic power supply, further hampering productivity.

The need for urgent reforms is evident. Pakistan must prioritise the development of a cost-effective, sustainable energy mix that reduces dependency on expensive imports. Greater investment in renewable energy and an improved transmission infrastructure are crucial to lowering industrial power costs.

Without decisive action, the country risks further de-industrialisation and a widening trade deficit. Reforms are needed before high electricity prices snuff out what remains of Pakistan's industrial competitiveness.