Karachi
The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has issued a stark warning over the government’s aggressive fuel taxation policy, stating that the unprecedented surge in petroleum prices is pushing the national economy toward stagnation while severely undermining industrial competitiveness.
BMP Chairman and former FPCCI President, Mian Anjum Nisar, said that Pakistan’s recent fuel price hikes—ranging between 63% to over 75% in petrol and diesel—stand in sharp contrast to regional economies, where increases have remained limited to just 2% to 10%. He noted that India, Bangladesh, China, and Vietnam have adopted calibrated pricing strategies, shielding their industries through subsidies, tax adjustments, and gradual revisions, while Pakistan has imposed a disproportionately heavy burden on its economy.
“This policy divergence is not just alarming—it is economically damaging,” he said. “At a time when our exporters are already struggling with high energy costs and declining global demand, such an excessive increase in fuel prices is effectively pricing Pakistan out of international markets.”
Mian Anjum Nisar emphasized that petrol prices reaching around Rs458 per litre—driven largely by a petroleum levy exceeding Rs160 per litre—reflect a fiscal approach overly reliant on indirect taxation. While acknowledging the constraints posed by the IMF programme, he warned that excessive dependence on fuel taxes could choke economic activity rather than stabilize finances.
“Fuel is the backbone of all economic sectors—transport, manufacturing, agriculture, and services. When its cost rises sharply, the entire economic chain is disrupted,” he explained. “This is not just a price increase; it is a structural shock.”
He pointed out that logistics and transportation costs in Pakistan are already among the highest in the region. The latest fuel hikes will further inflate freight charges, increase input costs for manufacturers, and reduce profit margins across industries. Export-oriented sectors, particularly textiles and value-added segments, are likely to face significant setbacks as global buyers shift to more cost-competitive markets.
“Our regional competitors are gaining ground precisely because their governments are protecting industry from such shocks,” he said. “Bangladesh and Vietnam, for example, continue to offer stable energy pricing, enabling their exporters to secure long-term contracts at competitive rates.”
The BMP chief also expressed concern over the impact on small and medium enterprises (SMEs), which form the backbone of Pakistan’s industrial base. “Unlike large corporations, SMEs do not have the financial cushion to absorb sudden cost increases. Many will be forced to scale down operations, reduce workforce, or shut down entirely,” he warned.
In agriculture, the implications are equally serious. Diesel-powered machinery, including tractors, tube wells, and harvesters, will become significantly more expensive to operate. This, he noted, will drive up the cost of food production, contributing to inflationary pressures and exacerbating food security concerns.
Mian Anjum Nisar further highlighted the paradox of over-taxation, cautioning that higher fuel taxes may not yield the expected revenue gains. “There is a threshold beyond which increased taxation leads to reduced consumption and, ultimately, lower revenue collection. As economic activity slows, fuel demand declines, undermining the very fiscal objectives the government seeks to achieve,” he said.
He also criticized the distortionary impact of current pricing policies, particularly the cross-subsidization between petrol and diesel. “Such measures disrupt market signals and create inefficiencies. Instead of promoting rational consumption, they redistribute financial stress within an already fragile system,” he added.
On the social front, the BMP chairman warned of widespread repercussions. Fuel price increases, he said, are inherently regressive, disproportionately affecting lower and middle-income groups. The ripple effects—higher transport fares, increased food prices, and rising utility costs—will erode purchasing power and heighten economic hardship.
“This is not just an economic issue; it is a social challenge,” he said. “Persistent inflation and declining real incomes can lead to public discontent and instability.”
