Pakistan’s Fuel Subsidy Reaches Millions, but Critics Warn the Poorest Are Being Left Behind

More than 9.5 million Pakistanis have received discounted petrol under a government relief programme launched in September, according to Federal Minister Shaza Fatima Khawaja, who oversees information technology and telecommunications. The initiative is designed to cushion lower-income households from fuel costs that have surged in connection with the war on Iran, but economists and users say the benefits are unevenly distributed and may bypass those in greatest need.

The scheme, introduced by Prime Minister Shehbaz Sharif’s government, provides a reduction of 100 rupees, or roughly 36 cents, on every litre of petrol purchased by owners of motorcycles, rickshaws and small cars with engines up to 800cc. Applicants register by sending their national identity number, vehicle registration details and province to a dedicated short code, 9771. Before each refuelling stop, they send a second message that generates a token redeemable at any filling station across the country.

Two- and three-wheeled vehicle owners receive 500 rupees, about $1.80, per week, with a monthly cap of four tokens. Owners of cars up to 800cc get 1,000 rupees, or $3.60, every ten days, limited to three tokens a month. The government has approved 75 billion rupees, approximately $271 million, to fund the first three months of the programme through November, though Petroleum Minister Ali Pervaiz Malik has indicated the scheme could run for as long as ten months, or until the conflict ends, if conditions require it.

The programme has undergone significant revisions since its launch following complaints from users. Registration, initially a paid service, was made free, and a requirement that buyers purchase a minimum of five litres of fuel was scrapped. Khawaja said the system was redesigned based on feedback from people on the ground. In one notable change, riders no longer need the vehicle to be registered in their own name, provided they can supply the exact registration date shown on the documents.

“Even in my own house, there’s a bike registered in our name that our cook uses for daily errands,” Khawaja told Al Jazeera, explaining why the ownership requirement for two- and three-wheelers was dropped on September 20. She contrasted the current approach with an earlier cash-transfer scheme introduced in April, which reached just over a million bike owners, largely because disbursement required a bank account that most riders did not possess.

Petrol prices have climbed by nearly 50 percent since the war began on February 28, compounding Pakistan’s existing economic difficulties and intensifying pressure on consumers already contending with rising inflation. The government has positioned the fuel relief programme as a targeted intervention meant to assist those who depend on their vehicles for daily commuting and income generation.

Some beneficiaries acknowledge the assistance is useful but insufficient. Shakeel Ahmed, a 45-year-old electrician in Islamabad, said the relief helps people who use their vehicles for short local trips but falls short for those with heavier fuel consumption. “For people like us, who put in 1,000 to 1,500 rupees of petrol a day, it’s not enough,” he said, referring to daily fuel expenditures of roughly $3.60 to $5.40.

Economist Safiya Aftab told Al Jazeera that the programme has indeed reached the low-income segments it was designed to serve, noting that two-wheelers and 800cc cars are the typical vehicles of poorer Pakistanis. However, she also highlighted a government levy of 114 rupees, about 41 cents, per litre that is generating substantial revenue while contributing to inflation. Aftab said the government now earns more than 100 billion rupees, or roughly $361 million, per month from the levy, which was originally conceived as an environmental tax to discourage petrol consumption but has evolved into a significant source of fiscal revenue.

The programme’s funding structure has drawn scrutiny from the International Monetary Fund, which is currently supporting Pakistan through a $7 billion programme. An IMF team is in Islamabad this week for discussions with government officials as authorities seek to balance fiscal commitments with their response to the fuel shock. Officials familiar with the talks say the Fund wants relief limited to three months and channelled through the Benazir Income Support Programme, the country’s primary cash-transfer mechanism. Khawaja said the IMF’s position from the outset was that assistance had to be targeted rather than universal, which informed the decision to build the scheme around actual token usage instead of a blanket price reduction.

Running costs have already exceeded initial projections. Malik put the monthly expense at 25 to 30 billion rupees, or $90 million to $108 million, when the scheme launched, but by late September he said it had risen to 35 to 40 billion rupees, approximately $126 million to $144 million. The rising expenditure raises questions about the programme’s long-term sustainability, particularly as the government navigates IMF conditions and competing fiscal demands.

Beyond cost concerns, the scheme’s design excludes several categories of fuel users entirely. Cars with engines larger than 800cc, diesel vehicles and public transport are not eligible, leading some experts to caution that the subsidy risks missing the most vulnerable sections of society. A poor household that relies on public buses or shared transport, for instance, receives no direct benefit even though rising fuel costs are passed on through higher fares. The exclusion of diesel vehicles also affects goods transporters and others whose livelihoods depend on fuel-intensive work.

The programme’s reliance on text messaging and token generation assumes access to mobile phones and familiarity with digital registration procedures, which may pose barriers for some of Pakistan’s poorest citizens. While the removal of registration fees and the ownership requirement has broadened eligibility for two- and three-wheeler users, the scheme still operates through a mechanism that requires a certain level of administrative engagement. For households without consistent mobile access or documentation, the relief may remain out of reach.

The government faces a delicate balancing act. It must demonstrate responsiveness to popular economic pain while satisfying IMF expectations for fiscal discipline and targeted spending. The fuel relief scheme represents an attempt to thread that needle by subsidising specific consumption rather than slashing prices across the board, but its limitations are becoming apparent. As the war on Iran continues to influence global and regional energy markets, Pakistani households and policymakers alike are watching whether the programme can adapt to reach those who need it most — or whether millions will continue to fall through the cracks.