Pakistan’s industry is teetering on the brink of collapse, with policies that are actively dismantling it. Chief among the culprits is the prohibitive cost of energy, driven by a deeply dysfunctional energy sector.

Without urgent reforms to rationalize and reduce energy costs to globally competitive levels, Pakistan will remain trapped in a cycle of stagnation, incapable of exploiting its industrial potential to stimulate exports and generate sustainable income growth and development.

Instead of enabling growth, current policies are accelerating deindustrialization, decimating well-established sectors of the economy.

The textile value chain, particularly the spinning and weaving sectors, are glaring examples. These sectors are integral not only for export earnings but also for sustaining employment and supporting ecosystems of livelihoods.

Yet, they are now in existential peril due to energy costs that are nearly double those of competitor countries, coupled with counterproductive fiscal policies.

With grid tariffs in Pakistan between 13-16 cents/kWh compared to 5-9 cents in competing countries and energy accounting for up to 54% of conversion costs across the textile value chain, another major blow came with the withdrawal of the zero-rating and sales tax exemption on local supplies for export manufacturing.

This policy subjected domestic inputs to an 18% sales tax while imports of the same goods remain duty- and tax-free under the Export Facilitation Scheme (EFS).

Such a policy defies economic logic and international trade norms, including those under the WTO framework, which emphasize creating a level playing field between local industries and imports.

Countries worldwide often tilt the playing field to protect their domestic industries. Pakistan, conversely, has done the opposite—effectively subsidizing foreign manufacturers while taxing its own. The result has been devastating for local production, creating distortions that undermine the competitiveness of Pakistani products in both domestic and global markets.

However, even if this fiscal imbalance were rectified, Pakistan’s textile sectors would still face insurmountable challenges. Energy costs remain the principal bottleneck. Yarn and cloth produced domestically are uncompetitive against imports even after paying customs duties, regulatory duties, and sales tax on imports. Energy is........

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