The Impact of Petrol and Diesel Price Increases on the Agricultural-Industrial Sectors
The increase in petrol and diesel prices in Pakistan is expected to prove highly detrimental to the country’s agricultural and industrial structure. Fluctuations in global crude oil prices, along with the geopolitical situation in the Middle East, are likely to significantly raise transportation and production costs, which will directly affect cotton cultivation, the ginning industry, and the textile sector. Agriculture, which accounts for approximately 24% of the national economy, is currently under severe pressure due to rising diesel prices. As a result of the new prices, the cost of operating tractors, harvesters, and tube wells is expected to increase by approximately 30 to 40 percent, making profitable cultivation increasingly difficult for farmers.
The outlook for cotton production remains particularly concerning. In the 2025–26 season, cotton production stood at approximately 5.6 million bales against the target of 10.2 million bales, reflecting a decline of around 45% (according to PCGA reports). The primary reasons for this decline include rising production costs and climate change. Consequently, 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 ginning units is also expected to deteriorate. More than 400 units have already been shut down. An additional increase of approximately 20 to 25 percent in the transportation and processing costs of seed cotton is likely to result in the closure of another 100 to 200 units. Currently, the price of seed cotton ranges between Rs. 8,000 and Rs. 9,000 per 40 kilograms; however, rising costs will place further pressure on this sector, leading to the potential disruption of hundreds of ginning units and an increase in unemployment.
The textile industry, which accounts for nearly 60% of Pakistan’s exports, is already under strain to remain competitive in global markets. Freight charges for transporting raw cotton from factories to mills and finished goods to ports are expected to rise by 10 to 15 percent, further exacerbating the challenges faced by exporters. Following the increase in petrol and diesel prices, the cost of operating generators is also expected to rise by approximately 15 to 20 percent, which will adversely affect global competitiveness and may result in a 5 to 10 percent decline in orders.
If effective measures such as targeted subsidies on diesel, promotion of solar-powered tube wells, and relief packages for the textile sector are not implemented promptly, this crisis could further damage the country’s exports and foreign exchange reserves. For long-term stability, enhanced policy support, the promotion of modern agricultural techniques, and a transition toward alternative energy sources are essential.