Miftah Ismail Says Expensive Electricity Is Pakistan's Biggest Export Barrier

Former federal finance minister Dr. Miftah Ismail has identified expensive electricity as Pakistan's single biggest barrier to export growth, warning that the country cannot compete in global markets until electricity tariffs are addressed. He made the remarks on Monday at a seminar in Karachi, where he also labelled petroleum taxes regressive and questioned the value of the National Finance Commission (NFC) framework in the absence of meaningful fiscal devolution to local governments.

Electricity Costs as an Export Barrier

Speaking at the 'Budget Insight 2026–27' seminar organised by the Applied Economics Research Centre (AERC) at Karachi University, Dr. Ismail singled out expensive electricity as the primary structural obstacle preventing Pakistani exporters from competing internationally. High industrial electricity tariffs — determined by NEPRA (the National Electric Power Regulatory Authority) and billed through distribution companies (DISCOs) such as LESCO, FESCO, and K-Electric — have been a persistent complaint among manufacturers in textiles, leather, and engineering.

Dr. Ismail stressed that without reducing electricity tariffs, export competitiveness would remain out of reach. His remarks reflect a broader industry concern: capacity charges tied to independent power producer (IPP) contracts, fuel cost adjustments (FCAs), and cross-subsidies have pushed end-user costs to levels that erode manufacturers' margins and raise the price of Pakistani goods in export markets.

Petroleum Taxes: Motorcyclists Bearing the Brunt

Dr. Ismail also turned his attention to petroleum product taxation, calling it highly regressive. He noted that between 50 and 60 percent of petrol consumed in Pakistan is used by motorcyclists, who are typically among the country's lower-income earners. Those motorcyclists are paying close to Rs. 100 per litre in combined taxes and levies — a burden that falls disproportionately on those least able to absorb it, with ripple effects on transport costs for small traders, daily wage earners, and informal-sector workers.

NFC Devolution: Form Without Substance

On fiscal governance, the former minister questioned the practical value of the NFC award — the constitutional mechanism that distributes federal tax revenue among the federal government and the four provinces — in the absence of functioning Provincial Finance Commissions (PFCs). PFCs are meant to further channel provincial resources to local governments, but Dr. Ismail said they are not operating effectively.

"If provinces do not devolve resources and powers to local governments, then centralisation at one level may prove more effective than monopolies at four different levels," he said. For the energy sector, this matters: local government capacity directly shapes how distribution infrastructure is maintained and how load-shedding schedules are managed at the district and city level.

A Broader Economic Decline

Dr. Ismail painted a sobering picture of Pakistan's wider economic trajectory, noting that real incomes had fallen consistently over the past four years and that India and Bangladesh had surpassed Pakistan across a range of economic and social indicators. He flagged deteriorating literacy rates — with nearly 60 percent of fifth-grade students in Sindh reportedly unable to read second-grade textbooks — and described child malnutrition and hepatitis as national crises, with Pakistan said to have the highest number of hepatitis patients in the world.