A. Policy favor importer rather than manufacturer

1. General

Further to KQU 3868 of 17.4.26 being an Important matter, we would inform you about Mr Shameer Haroon - Chief Tax / Legal & Company Secretary of Article of Pakistan's Manufacturing Sector Is Being Quietly Taxed into Irrelevance (Attachment 3509.1) in the ensuing paragraph, in Italic with emphasis in bold heading and numerical resetting ours for quick reading.

2. Manufacturer VS Importer profitability in USD

2.1 Table

2.2 On a comparable PKR 1 million sales base in 2023, here’s what has happened over the past 4 years (only due to managed exchange rate of PKR 279/USD):

3. Manufacturer

3.1 Manufacturer (with conversion cost, primarily gas constituting 8% of sales value in 2023) profitability has declined by 82% over the past three years, falling from US$ 430 to US$ 78 per USD 1 million sales (equivalent to PKR 120,000 to PKR 21,818). The quantum will, however, vary on a case-to-case basis depending on usage of gas in manufacturing process.

3.2 So what changed? Energy cost: Captive gas tariff has surged from PKR 2,200/MMBTU to PKR 4,900/MMBTU (including Gas levy), an increase of over 120%. This is a conversion cost borne entirely by manufacturers.

4. Importer margins? Completely unchanged

 

5. The Structural Imbalance This means: (a) Import economics remain intact (b) Domestic production economics are crushed While input costs for manufacturers have skyrocketed, the exchange rate has remained effectively stable.

 

5.1 Commercial importers? They simply import finished goods. They carry zero domestic energy exposure.

5.2 KC policy makers are protecting import margins while eroding manufacturing viability

 

5.3 The Consequences: This is not just a business issue, it is a policy distortion with long-term costs: (a)Manufacturing decline → job losses & deindustrialization (b) Import growth → higher forex outflows & trade deficit (c) Investor signal → Don’t produce locally, just import

6. The Bigger Question: If the exchange rate does not reflect rising energy costs, regulatory levies (Gas levy, etc.), then we are effectively subsidizing imports at the expense of domestic industry.

7. History We’ve Seen following before but not learinig from history 

 

7.1 A similar situation arose when Pakistan was granted GSP+ status in 2014.

 

7.2 Despite preferential access to EU markets, exports did not realize their full potential during the period 2014–2017, largely because the PKR/USD exchange rate was kept artificially stable. The intended competitiveness gain was effectively neutralized by exchange rate management.

8. The find Question is:

What is happening to those who are actually trying to produce, employ, and build in Pakistan?

Because right now, KC policy makers are making it harder to manufacture, and easier to import.

B. Kasbati & Co. news and Recommendations,

We appreciate the author for highlighting the major Policy Drawback issue.

Hence, we recommend that all should take up to the matter to higher up to reduce Gas price PFC) (as well as tax levy) else there will be further closure of manufacturer, which would lead to massive unemployment and social unrest.

C. Multiplication

Although all the Commentaries are to the extent of the Subscribed IDs only, however, your Goodself is allowed to share this TLQC for the Noble Cause to create a tempo, through recipients of your Associations, so that the govt reverse their decision (which decision is against all Industries as well as Masses.

D. List of further TLQCs:

(a) 3337 of 11.11.25 about One Pakistani with Rs 4.77 Trillion Brain Drain VS Rs 12.5 Trillion whole Pakistan Budget

(b) 3336 of 11.11.25 about Tax Policy Crisis: Revenue Obsession and Failure of Reform

(c) 3329 of 30.10.25 about Collection by FBR; while New Tax Policy Office is directly report to MoF

(d) 2884 of 30.8.24 about High Taxes, Bills & Corrupt System but Brain Drain not Advisable

(e) 2881 of 27.8.24 about ST at Import Stage be abolished to reduce Corruption - SZ

(f) 3353 of 18.11.25 High Tax Policies, etc lead to 1000s Industries Closure or Moved abroad & Action please

E. Further Details & Services

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.