Soaring petroleum prices are squeezing Pakistan’s agricultural sector, reducing farm profits, threatening food affordability, and putting rural livelihoods at risk.

Pakistan’s latest petroleum price hike exposes the country’s economic vulnerability to global energy markets. The government raised petrol and diesel prices by Rs55 per litre, pushing fuel costs to record highs. This affects multiple sectors. Agriculture — central to economic stability, food security, and rural employment — is hit the hardest.

According to official announcements, authorities set the ex-depot price of high-speed diesel at Rs335.86 per litre. Petrol is now Rs321.17 per litre, up about 17 per cent, as of last Saturday. Policymakers cite rising international oil prices and fiscal pressures. Global markets respond to Middle East geopolitical tensions. At home, these changes raise more than just transport costs. For Pakistan’s farmers, higher fuel prices raise production costs and increase financial uncertainty.

In recent years, economists have increasingly used the term “fuelflation” to describe the inflationary pressures triggered by rising fuel prices. In Pakistan’s case, fuelflation severely increases costs for farmers by raising the price of fuel used in plowing, irrigation, and transportation, which directly affects rural incomes and food prices.

We must reduce its reliance on fossil fuels and adopt energy-efficient farming, or global shocks will keep raising costs and straining rural life

Diesel, in particular, is crucial for agriculture; tractors prepare land, tube wells pump irrigation water, trucks transport crops to markets and they all use diesel engines. Diesel powers nearly every stage of the value chain. When diesel prices rise sharply, crop cultivation costs increase almost immediately. For farmers, the impact begins even before seeds are sown. Land preparation needs tractors and ploughs that run for hours. Rising diesel prices increase these costs. Harvesting machinery, threshers, and post-harvest equipment also run on diesel engines. As a result, the whole farming cycle becomes more expensive.

These rising costs pose real challenges for farmers already working with thin margins. Pakistan’s agricultural sector is mostly smallholder farmers with small plots. Many lack access to affordable credit, modern machinery, or efficient market infrastructure. Even small cost increases can threaten their livelihoods.

Irrigation will feel the impact of fuelflation right away as, in areas where canal water is unreliable, tube well groundwater pumping is essential for crops such as wheat, rice, cotton, and sugarcane. Facing higher irrigation costs, some farmers may reduce pumping hours or delay watering to save money. Such adjustments can hurt crop growth and yields. Reduced irrigation can harm productivity and farm incomes.

The effects of fuelflation go beyond farms and impact the food supply chain as well. Pakistan’s agricultural markets depend on road transport to move crops from rural areas to cities. Trucks take wheat to flour mills, vegetables to wholesale markets, and fruits to storage or export facilities. When diesel prices rise, transporters increase freight charges to cover costs. These higher charges move through the supply chain, resulting in higher food prices for consumers. This directly fuels food inflation, which alarms households by making staples more expensive and further straining family budgets.

Smallholder farmers are vulnerable in this setting. Large commercial farms have reserves or institutional credit. Small farmers rely on informal loans to buy inputs. When costs rise, they may cut planting, switch crops, or hire less labor. These choices cut income and threaten their food security. Some farmers use less fuel or borrow at high rates to keep working. Lower fuel prices are prompting farmers to rethink their crop choices.

Irrigation- or machine-intensive crops, such as rice and sugarcane, involve high pumping and transport costs. If diesel remains expensive, farmers may increasingly shift towards crops that require fewer inputs or have shorter production cycles. Such changes may reduce farmers’ costs in the short term, but they could disrupt production patterns and affect industries linked to major crops. Changes to what is grown could alter food supply and exports.

As a net importer, Pakistan immediately experiences fuel price hikes when global prices change. Because agriculture relies heavily on diesel-powered machinery, these energy shocks ripple through the entire agricultural economy. So, fuelflation is not just a short-term issue, it is a deeper, structural weakness.

Pakistan must develop a long-term strategy that integrates energy and agricultural policies. Expanding renewable energy in farming offers one way forward. Solar-powered irrigation has shown good results in several pilot projects in Pakistan. By using solar pumps instead of diesel, farmers can cut operating costs and reduce carbon emissions. Once installed, solar irrigation offers a reliable and affordable energy source for groundwater pumping. But solar systems are expensive. Government subsidies, affordable loans, and partnerships could help more farmers adopt them.

Promoting energy-efficient machinery offers another important strategy. Modern tractors and farm equipment designed for better fuel efficiency perform the same operations while using less diesel. Cooperative machinery-sharing models allow small farmers to access modern equipment without high ownership costs. In the short term, policymakers should shield farmers from fuel shocks. Options include reducing tariffs on tube wells or providing financial aid to smallholders.Enhancing rural infrastructure and agribusiness supply chains can also reduce transport costs and strengthen market connections.

Fuelflation demonstrates the link between Pakistan’s food system and global energy markets. When fuel prices rise, costs ripple from farms to families. Pakistan’s agricultural sector drives economic growth, employment, and national food security. The country must view protection from energy price volatility as a strategic priority.

Manan Aslam is affiliated with the School of Management, Jiangsu University, Zhenjiang, Jiangsu, P.R. China, and the Department of Agribusiness and Entrepreneurship Development, MNS-University of Agriculture, Multan, Pakistan.

Published in Dawn, The Business and Finance Weekly, March 9th, 2026