Countries are increasingly acknowledging the strategic significance of cold storage in enhancing food security. To foster growth in this sector, various measures such as subsidies, tax incentives, and preferential electricity tariffs have been implemented.
Countries are increasingly acknowledging the strategic significance of cold storage in enhancing food security. To foster growth in this sector, various measures such as subsidies, tax incentives, and preferential electricity tariffs have been implemented.
Pakistan faces the risk of lagging if it does not adopt similar supportive policies. However, a recent decision by the National Electric Power Regulatory Authority (Nepra) has generated significant criticism for obstructing progress in these critical areas.
The policy under scrutiny pertains to the blanket classification of cold storage facilities as ‘commercial’ entities within Nepra's regulatory framework. This uniform approach fails to recognise the industrial functions that many cold storage facilities serve, including the preservation of agricultural produce, the reduction of post-harvest losses, and the maintenance of a reliable supply chain for exports. Stakeholders contend that this classification results in elevated operational costs for an industry that is essential to Pakistan's food security and economic development.
The implications of the recent regulatory changes extend beyond the agricultural sector. Cold storage facilities play a crucial role in preserving the quality of export goods, including fruits, vegetables, and seafood. The increased costs resulting from the commercial classification may render Pakistan’s exports less competitive in the international marketplace. In a nation already facing trade deficits, this policy has the potential to exacerbate existing economic challenges.
In a controversial decision, Nepra has imposed a commercial tariff on industrial cold storage facilities, which has sparked considerable concern among investors and stakeholders within Pakistan's agricultural and logistics sectors. This ruling appears to contradict the government's initiatives aimed at enhancing the national cold chain infrastructure, a vital component of Pakistan's food security and export capabilities.
The ‘Cool Chain Industry’ initiative, led by the Ministry of National Food Security, was launched to promote the establishment of modern cold chain facilities throughout Pakistan. This initiative has successfully attracted significant investment from both domestic and international sources, resulting in the deployment of millions of dollars towards state-of-the-art cold storage operations. Such facilities are essential for reducing food wastage, improving the export readiness of perishable goods, and ensuring a consistent food supply across the nation.
However, Nepra’s classification of these specialised facilities under the commercial tariff framework has created substantial disruption within the industry. Unlike typical commercial enterprises, industrial cold storage facilities operate on a scale and with energy requirements that markedly exceed those of conventional businesses. Subjecting them to commercial tariffs imposes an unsustainable financial burden on operators, threatening the viability of existing investments and discouraging future prospects.
Industry experts contend that this policy shift undermines the foundational objectives of the Cool Chain Industry initiative. “The imposition of commercial tariffs negates the government’s objective of modernising Pakistan’s cold chain infrastructure”, says a senior industry analyst. “Operators are struggling to achieve profitability, and the potential for attracting new investments appears bleak under the current tariff structure.”
The ramifications of this decision extend beyond domestic operators. Global financial institutions such as the International Finance Corporation (IFC) and the World Bank, which have expressed significant interest in supporting cold chain projects in Pakistan, may reconsider their involvement. These institutions have recognised the critical importance of a robust cold chain in mitigating food wastage and enhancing Pakistan’s agricultural exports. Consequently, by rendering cold storage facilities economically unviable, NEPRA’s decision risks alienating these essential development partners.
For Pakistan, the stakes are considerable. The agriculture sector, which makes significant contributions to the country’s GDP, heavily relies on effective cold storage solutions to preserve the quality of perishable goods. An inadequate cold chain infrastructure further exacerbates food wastage, which is estimated at 30-40 per cent annually, and hinders the nation’s ability to compete effectively in international markets.
Nepra has adopted a uniform classification for cold storage facilities. This decision has been criticised for hindering modernisation efforts, jeopardising millions of dollars in potential investments, and compromising Pakistan's competitiveness in the global context of food security and export excellence
The imposition of elevated commercial tariffs on industrial cold storage facilities in Pakistan is generating significant concerns within the food and pharmaceutical sectors. Experts caution that the financial burden on operators could result in a detrimental shift from adherence to best practices toward cost-reduction strategies, and in some instances, may foster outright malpractices.
One of the most alarming ramifications of this tariff policy is the potential compromise of food safety. Cold storage facilities play a vital role in maintaining precise temperature controls, which are essential in preventing contamination and spoilage. However, when faced with increasing costs, operators may resort to scaling back on crucial maintenance or reducing operational efficiency, thereby placing domestic consumers and international markets at risk.
The likelihood of regulatory violations also increases as a consequence of unsustainable tariffs. Financially constrained operators may opt to forgo essential certifications or bypass stringent compliance protocols. This not only jeopardises the safety of stored goods but also undermines Pakistan’s credibility in global food and pharmaceutical exports, potentially threatening the nation’s position in lucrative international markets.
The repercussions extend beyond immediate operational concerns to the broader economic environment. The emergence of substandard practices can erode investor confidence in the sector. With a damaged reputation, both local and international investors may be reluctant to finance new projects or sustain existing investments, thereby impeding the industry’s growth and its economic contributions.
In summary, the current tariff regime represents more than merely a financial burden; it poses a significant risk to the stability of a sector that is crucial to Pakistan’s economic aspirations. Policymakers must reassess this strategy to balance fiscal objectives with the long-term sustainability of the cold storage industry, thereby ensuring food safety, regulatory compliance, and investor confidence. Without prompt intervention, the country’s ambitions in global markets may face irreparable harm.
Industry stakeholders have urged the government to intervene and reverse Nepra’s decision. They emphasise the necessity of a supportive regulatory environment to foster growth and innovation within the cold chain sector. Pakistan’s commitment to food security and export development is presently under scrutiny.
Authorities need to acknowledge the strategic significance of this industry and restore confidence among stakeholders. As the government navigates this contentious issue, the future of Pakistan’s cold chain infrastructure remains uncertain. Without timely action to address the tariff classification, the country risks losing momentum in a sector that is vital to its economic and social development.
The recent policy shift has raised significant concerns across Pakistan's industrial and agricultural sectors. Nepra has adopted a uniform classification for cold storage facilities. This decision has been criticised for hindering modernisation efforts, jeopardising millions of dollars in potential investments, and compromising Pakistan's competitiveness in the global context of food security and export excellence.
The cold chain sector is crucial for the preservation of perishable goods and the maintenance of food quality, serving as a vital component of Pakistan's agricultural economy. Nepra's failure to acknowledge the industrial scope of contemporary cold storage facilities has inadvertently stifled innovation and limited private-sector involvement in this essential area. This blanket approach ignores the considerable efforts of both public and private stakeholders to establish a state-of-the-art cold chain infrastructure.
Industry asserts that Nepra's position undermines the broader national agenda, particularly given the urgent need for a robust system to mitigate post-harvest losses and fulfill international export standards. Pakistan's agricultural exports, already confronting formidable competition, face the risk of further marginalisation in global markets due to outdated policies that do not incentivise technological advancements and operational efficiencies in cold storage facilities. In response, stakeholders are calling on authorities to reassess the policy framework regulating the sector.
Industry experts contend that classifying cold storage facilities as industrial units could unlock investment opportunities, stimulate innovation, and enhance Pakistan’s food security capabilities. Absent such reforms, the nation risks forfeiting critical opportunities for economic growth and advances in export performance.
As global demand for efficient cold chains continues to rise, it is essential for Pakistan to align its policies with international standards to ensure a sustainable and competitive future for its agricultural and industrial sectors.
The writer is a trade facilitation expert, working with the federal government of Pakistan.
