KARACHI, Feb 7 (ABC): High utility costs are beginning to choke Karachi’s small industries, as rising electricity, gas and water tariffs sharply increase production expenses and force many units to scale back operations or consider shutdowns, industry representatives say.
Small and medium-sized enterprises (SMEs) across the city’s major industrial zones report that energy and water bills have doubled, and in some cases tripled, over the past few years. As a result, factory owners say survival has become increasingly difficult.
Industrial clusters in Korangi, SITE, Landhi, North Karachi and Baldia appear to be the worst affected.
Electricity tariffs hit hardest
Entrepreneurs say electricity has become their single largest expense.
Higher base tariffs, combined with multiple taxes, fuel adjustments and surcharges, now exceed labour and raw material costs for many units. Consequently, profit margins have shrunk sharply.
“Small industries simply cannot absorb these costs,” said Muneeb Hussain, a small entrepreneur in SITE.
“Unlike large exporters, we have limited margins and no access to subsidised energy. High utility charges are eroding our competitiveness and pushing businesses into losses,” he told Wealth Pakistan.
He added that frequent price hikes make planning and budgeting almost impossible for small manufacturers.
Gas shortages worsen production
At the same time, gas shortages have further complicated operations.
Many small units rely on gas to run boilers and heating processes. However, inconsistent supply, low pressure and sudden shutdowns disrupt daily production schedules.
Therefore, factory owners often turn to alternative fuels such as diesel or furnace oil. These options, however, significantly increase operating costs.
“Frequent gas shutdowns force us to use generators and expensive fuels,” Muneeb said. “Diesel and furnace oil add to costs at a time when demand remains uncertain.”
Industry experts say this shift not only raises expenses but also reduces efficiency.
Water scarcity adds another burden
Water shortages present yet another challenge.
Several industrial areas receive insufficient municipal supply. Consequently, factories must purchase water from private tankers at high prices.
For units engaged in textiles, leather, food processing and chemicals, water remains a critical input. Therefore, rising tanker rates directly inflate production costs.
“Water shortages and rising tanker prices are another major problem,” Muneeb noted. “For many small units, water costs have become unsustainable.”
Workers feel the impact
The effects of rising utility costs extend beyond factory owners.
Reduced production has already led to layoffs, shorter work shifts and delayed wage payments. Workers, many of whom rely on daily earnings, face increasing financial stress.
“When factories slow down, livelihoods are directly affected,” said Junaid Memon, a factory owner in Korangi Industrial Area.
He told Wealth Pakistan that smaller businesses often lack financial buffers. Therefore, even minor disruptions can halt operations.
Exports losing competitiveness
Export-oriented small businesses also struggle to compete internationally.
Higher energy tariffs make Pakistani products more expensive than those from regional competitors such as Bangladesh, Vietnam and India. These countries offer targeted subsidies and more stable utility pricing for small industries.
As a result, local manufacturers risk losing orders to overseas rivals.
Industry representatives warn that unless costs are rationalised, Pakistan’s small exporters may gradually lose their foothold in global markets.
Trade bodies seek relief
Business associations have repeatedly urged the government to intervene.
The Karachi Chamber of Commerce and Industry (KCCI) and other trade bodies have called on federal and provincial authorities to rationalise tariffs and introduce special relief packages for SMEs.
Their proposals include reduced electricity rates during off-peak hours, restoration of uninterrupted gas supply and removal of excessive surcharges and taxes on utility bills.
Some industrialists are exploring solar power to cut energy costs. However, high upfront installation expenses and limited space in congested industrial zones remain major obstacles.
Economic risks for Karachi
Entrepreneurs warn that ignoring small industries could damage Karachi’s broader economy.
“Small units contribute significantly to employment, value addition and supply chains linked to larger exporters,” Junaid told Wealth Pakistan. “If these industries collapse, recovery will be difficult.”
Analysts note that SMEs form the backbone of Karachi’s manufacturing sector. Therefore, sustained pressure from high utility costs could slow industrial activity, reduce exports and increase unemployment.
For many small factory owners, timely policy support may determine whether they survive or shut down.