Pakistan’s recent diplomatic success in helping ease tensions between the US and Iran has elevated its standing as a constructive player on the global stage.
The development comes at a time when international oil markets are stabilising, offering countries like Pakistan a potential opportunity to strengthen economic recovery and industrial growth.
However, Aptma in a letter to Minister for Petroleum and Natural Resources Ali Pervaiz Malik warns that these gains risk being offset by domestic challenges, particularly the rising cost of energy driven by petroleum levies.
At the centre of concern is the heavy levy imposed on furnace oil, which has significantly increased fuel costs for industrial users. With a levy of Rs80,000 per tonne, furnace oil prices have surged to around Rs330,000 per tonne. This has pushed the cost of electricity generated through backup sources to nearly Rs75 per unit, more than double the average grid tariff of approximately Rs32 per unit.
The impact is being felt most acutely by export-oriented industries, which are already operating under tight margins. “This level of energy cost creates a structural disadvantage,” Aptma chairperson Kamran Arshad notes, pointing out that regional competitors benefit from far lower and more predictable energy pricing.
The issue is compounded by ongoing load shedding in industrial areas, forcing manufacturers to rely on alternative energy sources such as furnace oil-based generation. While intended as a fallback, this option has become prohibitively expensive due to the levy structure.
Industry representatives argue that the petroleum levy, originally designed as a revenue measure, is now directly influencing electricity tariffs and, by extension, the overall cost of production. “There is little economic justification for such a high levy on a backup fuel,” stakeholders say, adding that the policy effectively penalizes industries for ensuring continuity in the face of unreliable grid supply.
In addition to fuel costs, concerns have also been raised about the current captive power levy framework. Businesses say the mechanism has increased operational expenses without delivering improvements in energy availability or efficiency, further eroding competitiveness.
The timing of these challenges is critical. With Pakistan gaining international recognition and benefiting from a relatively stable external environment, industry leaders believe the country is well-positioned to expand exports and attract investment provided domestic policies are aligned with these opportunities.
Business groups are now calling for an urgent review of the petroleum levy on furnace oil, as well as broader reforms in energy pricing. They argue that rationalising these costs would not only reduce pressure on industries but also help translate diplomatic momentum into tangible economic gains.
Originally published in The News
