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KARACHI: The sudden and staggering hike in the cost of utilities has put the survival of thousands of Small and Medium Enterprises (SMEs) at stake, with a dominant fear of scaling back business activities and hundreds of lay-offs in the near future.

The government increased the gas tariff up to 193% on different categories of consumers. Industries and SMEs saw a significant tariff hike from 83-90 percent, raising the rate up to Rs 2,200 per MMBtu.

The SMEs already been affected adversely by the high electricity cost, shrinking their margins significantly, and the bombshell of gas prices will add fuel to the fire towards more destruction of the economic activities, said Syed Raza Hussain, President Federal B Area Association of Trade and Industry (FBATI).

He said that the manufacturing and processing units of the SME sector will feel the pinch of high energy prices in the coming days, which may decline their output to domestic and export industries.

Besides the utilities cost, the logistics cost also went high as the government made massive hikes in fuel prices and avoided passing on the positive impact to the consumers. The rise in energy prices has put country’s SMEs at a competitive disadvantage on the global stage; hence, this trend could also hurt the growth of national exports, president FBATI said.

The SME sector is considered the backbone of any economy with a significant role in the country's economic development.

As per the estimates of the Small & Medium Enterprise Development Authority (SMEDA), there are more than 5 million SMEs in Pakistan, contributing 40% to the GDP of Pakistan and 25% in overall exports. After the Agriculture sector, the SME sector employs the highest percentage of the working population in the country.

Raza Hussain mentioned that industries, including SMEs, will face low gas pressure, and even load-shedding of natural gas is likely in winter, which will apparently cease their plants for many days in the months because these units could not bear to install alternate solutions in the absence of natural gas.

He warned that the massive lay-offs could lead to protests across the country if the interim government does not rationalize the energy prices in the near future.

Copyright Business Recorder, 2023

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