Can Kashmir’s factories survive yet another tariff hike?

By Khalid Ahmad Zahgeer

Kashmir’s industrial sector has been struggling for years. Markets have contracted, production costs have risen, working capital has become increasingly difficult to arrange, and many industrial units are operating far below their installed capacity. Several entrepreneurs are fighting simply to keep their factories running and their workers employed. At a time when the industry needed relief, stability and a supportive policy environment, the proposed hike in electricity tariffs for industrial consumers comes as yet another severe blow.

For an industry already under enormous stress, electricity is not a luxury or an avoidable expense. It is one of the most fundamental inputs of production. Every increase in the tariff directly increases the cost of manufacturing. Unlike many other businesses, a manufacturing unit cannot simply switch off its machines and continue operating. Electricity powers the entire production chain. The question, therefore, is not whether industry can absorb another tariff increase. The real question is: how much more burden can an already stressed industry realistically carry?

Industry is not a cash-rich sector

There appears to be a growing perception that industries can simply pass every increase in input costs on to consumers. This may be possible in theory, but the ground reality is very different. Manufacturers are already competing with products coming from outside Jammu and Kashmir. Local industries have to deal with higher transportation costs, limited economies of scale, expensive logistics and a relatively small market. If the cost of local production rises further, locally manufactured products become even less competitive.

An entrepreneur cannot increase the price of his product every time electricity, transportation, raw materials or other operating costs increase. The market may simply reject the higher price. The result is predictable: lower production, reduced competitiveness, mounting losses and eventually closure.

The vicious cycle of industrial decline

The government must understand that a factory closure is not merely the closure of a building. Behind every industrial unit are workers, suppliers, transporters, service providers, banks and families whose livelihoods depend upon that unit. When an industry becomes unviable, employment suffers. When employment suffers, purchasing power declines. When purchasing power declines, markets shrink further. And when markets shrink, more businesses struggle. This creates a vicious cycle of industrial decline.

At a time when the government speaks about employment generation, entrepreneurship and economic growth, policies that substantially increase the cost of manufacturing require much greater scrutiny.

Can sick and struggling units survive this burden?

The situation is even more serious for units that are already financially stressed or have accumulated liabilities. Many entrepreneurs borrowed money to establish their units with the expectation that supportive policies, reasonable input costs and a growing market would allow them to repay those investments. Instead, many have encountered declining demand, increased competition, rising costs and difficulties in accessing affordable working capital.

For such units, another increase in electricity expenditure is not a minor accounting adjustment. It can become the difference between operating and shutting down. An industry that is already struggling to survive cannot be expected to carry an unlimited burden of additional costs.

Tariff policy must consider industrial realities

There is nothing unreasonable about the need for utilities to remain financially sustainable. But tariff policy cannot be viewed only through the lens of revenue recovery. Industrial consumers contribute to the economy in several ways. They generate employment, create local supply chains, pay taxes and fees, use banking and financial services, and reduce dependence on products brought from outside.

Therefore, the government must ask a larger question: what is the economic cost of making local manufacturing uncompetitive? A tariff increase may generate additional revenue in the short term, but if it forces factories to reduce production or close down, the economy ultimately loses much more.

Industry needs relief, not another shock

The government should seriously reconsider the timing and impact of the tariff hike on industrial consumers. At the very least, there should be a comprehensive review of industrial power tariffs, with special consideration for MSMEs, sick units, low-utilisation units and industries operating in difficult market conditions.

There should also be a meaningful dialogue with industry representatives before imposing additional burdens. Entrepreneurs are not asking for charity. They are asking for an environment in which they can produce, compete, repay their loans and employ people. If the government genuinely wants manufacturing to become an engine of employment and economic growth in Jammu and Kashmir, it must make manufacturing viable.

A warning that must not be ignored

The industrial sector has been giving warning signs for a long time. Factories operating below capacity, mounting financial pressures, shrinking markets and entrepreneurs losing confidence are not isolated problems. They are symptoms of a deeper industrial crisis. The answer cannot be to keep adding costs to an already weakened sector.

Kashmir’s industry does not need another shock. It needs breathing space. It needs affordable power, accessible finance, predictable policies, wider markets and genuine institutional support.

If electricity tariffs continue to rise while the market remains stagnant and the cost of doing business keeps increasing, we may eventually reach a point where there will be little industry left to support.

The government must therefore decide what it wants: a higher tariff from a shrinking industrial base, or a stronger industrial sector capable of generating employment, investment and long-term revenue.

The choice is not merely about electricity tariffs.

It is about whether Kashmir’s manufacturing sector will survive.

The writer is an industrialist