In response to a significant surge in petroleum prices initiated by the interim government, business leaders expressed concerns on Wednesday, cautioning that this decision could lead to the closure of around 50 percent of industrial units and trigger a wave of unemployment.
They emphasized that trade and industry, which were already grappling with the impact of substantial power tariff increases of nearly Rs10 per unit, would find it exceedingly challenging to bear the newly announced hikes of Rs17.50 and Rs20 per liter in petrol and diesel prices respectively.
The expected consequence of these price hikes is a further exacerbation of the already existing inflationary pressures, subsequently raising both the costs of living and manufacturing, they pointed out.
Suleman Chawla, the acting president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), highlighted that the apex chamber had repeatedly urged the previous coalition government to address issues related to oil cargo handling, adjustments in refining processes, and procedural aspects in the import of Russian crude.
He emphasized that the international oil markets were currently in flux due to a global economic slowdown, leading to diminished international demand for petroleum products that is projected to persist for a few years. In line with this, he predicted that the domestic demand for imported crude by refineries would not exceed 150,000 barrels per day due to the ongoing deceleration of the national economy.
Chawla called upon the government to refrain from any further increases in the key policy rate, petroleum prices, and electricity tariffs, and also urged for the eradication of any manipulation in the exchange rate to achieve economic stability.
Mohammed Tariq Yousuf, the President of the Karachi Chamber of Commerce and Industry (KCCI), expressed concern that the latest surge in fuel prices would exacerbate the difficulties faced by consumers. He went on to express his concern that half of the industrial units had already ceased operations, and the remaining ones were engaged in a battle for survival. Yousuf underscored the need for the government to take measures to decrease petroleum and electricity prices in order to mitigate production costs.
Faraz-ur-Rahman, the President of the Korangi Association of Trade and Industry (KATI), warned that the surging fuel prices would inevitably lead to higher unemployment rates and disproportionately impact vulnerable segments of society. He also highlighted the anticipated increase in transportation costs for goods due to elevated diesel prices, affecting industries heavily reliant on cargo shipping and freight services. Rahman recommended prioritizing the implementation of renewable energy initiatives to counterbalance this situation.
Ehsan Malik, CEO of the Pakistan Business Council (PBC), emphasized that it was unrealistic to expect a temporary government to address immediate challenges such as inflation, devaluation, utility tariffs, and others. He stressed that these challenges were rooted in long-standing fundamental flaws within the economy. Malik pointed out that the country had been living beyond its means, depending on external assistance and debt to fund imports, government expenditure, state-owned enterprises, and energy sector losses. He suggested that a comprehensive five- to six-year International Monetary Fund (IMF) program, supported by fundamental reforms and oversight, could offer the potential for economic stability and growth.
Riazuddin, President of the Site Association of Industry, mentioned that the caretaker government’s limited mandate prevented it from enacting reform or significant structural changes during its brief tenure. He outlined the need to stabilize the currency below 270, lower the policy rate to 13 percent, and possibly implement partial or full bans on luxury and nonessential imports. Additionally, he called for a reduction in the tax burden on industries while expanding the tax net to include agricultural income, real estate, and trade.