Impact of petrol and diesel price hike on industry & agriculture
The recent increases in petrol and diesel prices in Pakistan are expected to have a highly detrimental impact on the country’s agricultural and industrial structure. Fluctuations in global crude oil prices, along with the ongoing geopolitical situation in the Middle East, are likely to raise transportation and production costs across the board. These higher energy costs will directly affect cotton cultivation, the ginning industry, and the textile sector—pillars of Pakistan’s rural economy and export base.
Agriculture, which contributes approximately 23–24 percent of Pakistan’s GDP, is already under severe pressure due to rising diesel prices. Under the new fuel-price regime, the cost of operating tractors, harvesters, and tube wells is estimated to increase by roughly 30 to 40 percent, making it increasingly difficult for farmers to maintain profitable cultivation. This cost surge is particularly acute for water-intensive crops and areas dependent on diesel-driven irrigation.
In this context, the Punjab government’s recently announced relief measures for farmers are an important step toward mitigating the impact at the provincial level. Chief Minister Maryam Nawaz has announced financial support for wheat growers, under which small to medium-scale farmers owning up to 25 acres of land will receive a subsidy of Rs. 150 per litre on 10 litres of diesel per acre.
This measure is expected to reduce the direct cost burden on farmers, provide practical relief in the field, and support the short-term stability of the agricultural sector. If effectively implemented and monitored, such targeted subsidies can serve as a useful model for balancing fiscal constraints with the need to protect vulnerable rural livelihoods.
The outlook for cotton production remains deeply concerning. In the 2025–26 season, cotton output stood at approximately 5.6 million bales, against a federal target of 10.2 million bales, reflecting a shortfall of around 45 percent (based on PCGA-linked data and official estimates). Rising input costs, erratic rainfall, and climate-induced uncertainty are among the main reasons for this decline. As a result, many farmers are likely to shift from cotton to sugarcane and other alternative crops, further increasing the risk of raw material shortages for the textile industry.
The situation in the ginning sector is also expected to deteriorate. Industry sources indicate that over 400 ginning units have already been shut down in recent years due to low cotton output, high operating costs, and weak demand. An additional increase of around 20 to 25 percent in transportation and processing costs for seed cotton could force another 100 to 200 units to close. Currently, the price of seed cotton in major markets ranges between approximately Rs. 8,000 and Rs. 9,000 per 40 kilograms, with some variation across districts. Continued cost pressures may lead to the disruption of hundreds of ginning units and a sharp rise in unemployment in rural areas.
The textile industry, which accounts for over 60 percent of Pakistan’s exports, is already struggling to maintain competitiveness in global markets. Freight charges for transporting raw cotton from farms and warehouses to textile mills, and finished goods to ports, are expected to rise by 10 to 15 percent, further squeezing thin profit margins.
At the same time, the cost of operating diesel-based generators is projected to increase by approximately 15 to 20 percent, which will raise production costs and reduce export competitiveness. This could translate into a potential 5 to 10 percent decline in new orders from key international markets.
In the prevailing circumstances, a coordinated approach involving support mechanisms for agriculture, facilitation of energy alternatives, and cost management across supply chains appears essential to ease immediate pressures.
Over time, gradual adjustments in policy, improved efficiency in resource use, and diversification in energy sources may help strengthen both the agricultural and industrial base, while maintaining a balance between economic sustainability and fiscal space.
Copyright Business Recorder, 2026