Leather Exporters Urge Budget Relief from High Energy and Production Costs

Pakistan's value-added leather sector formally asked Commerce Minister Jam Kamal Khan on Thursday to address high taxation, fragmented compliance burdens, and elevated production costs — including industrial energy charges — in the upcoming federal budget, warning that structural constraints are eroding the sector's global competitiveness.

What the Industry Is Asking For

Representatives of the leather industry presented a package of preliminary budget proposals at the Islamabad meeting, covering three broad areas:

• Tariff rationalisation and duty adjustments on imported industrial raw materials
• Tax relief measures for export-oriented manufacturing units
• A one-window compliance channel to replace overlapping inspections, approvals, and certifications from federal, provincial, and municipal authorities

The delegation stressed that the current multi-layer compliance framework — involving multiple government tiers — is adding direct costs and management hours that smaller exporters can ill afford.

Energy and Input Costs Driving Concern

High production costs sit at the heart of the sector's competitiveness problem. Industry stakeholders specifically pointed to challenges in import financing and high duties on industrial raw materials as factors squeezing margins on leather garments, gloves, footwear, handbags, and other value-added products destined for international markets.

While the meeting summary did not separately itemise electricity tariffs, industrial power costs in Pakistan have risen sharply over the past two years following a series of NEPRA (National Electric Power Regulatory Authority)-approved base tariff increases and fuel cost adjustments. Leather manufacturing — which involves tanning, dyeing, cutting, and stitching processes — is energy-intensive, and manufacturers served by IESCO in Islamabad or LESCO in Lahore (a major leather-producing hub) have seen industrial per-unit rates climb well above Rs. 50 per kWh on average billing, including taxes and surcharges.

The delegation urged the government to support exporters across the broader industrial ecosystem, emphasising affordable access to inputs as a prerequisite for expanding in international markets.

Pakistan's Leather Sector: Underperforming Its Potential

The official announcement noted that despite Pakistan's strong livestock base, established manufacturing expertise, and proven export capability, the sector continues to face multiple structural constraints that limit scale. Pakistan is one of the world's largest cattle and buffalo hide producers, yet the downstream value addition — finished leather goods — captures a fraction of what competing countries earn from similar raw material endowments.

Participants at the meeting argued that simplifying the compliance framework and reducing the cost of doing business would directly translate into higher export volumes and foreign exchange earnings, both priorities under Pakistan's current IMF programme commitments.