The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Friday warned that Pakistan’s industrial sector was facing a severe crisis due to high energy tariffs and heavy taxation, leading to widespread factory closures and job losses.

In December, it was reported that over 100 spinning mills and over 400 ginning factories had become non-operational, triggered by unprecedented taxes, high power tariffs, and a surge in under-invoiced cotton yarn and fabric imports from China and other countries.

Speaking at a press conference in Islamabad, President FPCCI Atif Ikram Sheikh said, “Costly electricity has crippled industrial activity, particularly in the textile sector.”

“Around 150 large textile units had shut down over the past two years,” he stated.

Sheikh urged the government to immediately abolish cross-subsidies imposed on the industrial sector and reduce the policy rate to single digits.

He proposed that interest rates be cut first to nine per cent and subsequently to seven per cent to revive industrial growth and investment.

Trader and business leader SM Tanvir said that the situation had also been highlighted in the World Economic Forum’s 2026 report, which increased Pakistan’s risk rating.

“According to the report,” he said, “The business activity and employment opportunities in the country are declining, while the small and medium enterprises (SME) sector has been reduced to a junkyard.”

Tanvir criticised tax policies, saying “non-filers face no scrutiny when depositing money in banks, but are heavily taxed”. “It appears the Federal Board of Revenue is working to please banks,” he alleged.

FPCCI officials warned that if the government failed to urgently address the issue of expensive electricity, the industrial sector could come to a “standstill”.

The officials criticised the government and the Power Division for not passing the relief of reduction in electricity tariff to the industrial consumers.

Recently, after NEPRA determined a reduction in the base tariff of electricity, the power division maintained that the number of domestic consumers availing subsidised rates was very high.

They emphasised that there was additional electricity available in the country, but the capacity charges for unused power units were paid by the citizens of the country.

Furthermore, they highlighted that the industrial tariff was around 12.5 cents per unit in Pakistan, whereas it was around 7.5 cents in India.

They appealed to the prime minister to “remove the industry from the ventilator” and reduce taxes on the export sector to prevent further economic decline.

According to an analysis, Pakistan’s export sector faces one of the most punitive tax regimes in the region. Exporters pay advance income tax, minimum turnover tax, super tax, and multiple withholding taxes across supply chains, while sales tax and duty drawback refunds are routinely delayed.

It further said that high and unpredictable energy prices further undermine export viability. Industry cross-subsidises domestic consumers, absorbs losses from theft and inefficiency, and pays capacity charges for unused generation.