Islamabad, Pakistan – More than 9.5 million people have received subsidised petrol under a special fuel relief scheme launched by Pakistan’s prime minister, Federal Minister Shaza Fatima Khawaja told Al Jazeera on Wednesday.
The initiative, aimed at lower-income citizens, comes as the government attempts to help households deal with fuel price increases tied to the war on Iran.
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The scheme, launched in September, offers 100 rupees ($0.36) off every litre of petrol to owners of motorcycles, rickshaws and small cars, through a text-message system.
Petrol prices have risen by nearly 50 percent since the war began on February 28, adding to Pakistan’s economic hardship and putting further pressure on consumers already grappling with rising inflation.
How the scheme works
Explaining the process, Khawaja, the minister for information technology and telecommunications, said applicants text their national ID number, vehicle registration, and province to 9771. A second message, sent before each visit to a pump, generates a token redeemable anywhere in the country.
Two- and three-wheelers get 500 rupees ($1.80) a week, capped at four tokens a month. Cars with engines of up to 800cc get 1,000 rupees ($3.60) every 10 days, for three tokens monthly.
After complaints, registration, once a paid service, was made free, and a five-litre minimum purchase was scrapped for the same reason.
Khawaja told Al Jazeera the system had been redesigned based on experiences of users on the ground.
Riders no longer need the vehicle to be registered in their own name, as long as 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 said, explaining why the ownership requirement for two- and three-wheelers was dropped on September 20.
An earlier cash-transfer scheme in April had reached just over a million bike owners, she said, largely because disbursement required a bank account most riders did not have.
‘The relief is decent’
Government officials say that the scheme has been expanded to include wider sections of society, especially those who depend on their vehicles to generate income.
“There’s a benefit; it’s not like there’s nothing,” Shakeel Ahmed, 45, an electrician in Islamabad, told Al Jazeera. “The relief is decent for people who use it normally, for local trips. But for people like us, who put in 1,000 to 1,500 rupees [$3.60-$5.40] of petrol a day, it’s not enough.”
Safiya Aftab, an economist, told Al Jazeera the scheme has reached the people it was meant to.
“The scheme has indeed reached low-income segments of society, people who typically use two-wheelers and 800cc cars. So yes, it’s a good thing that they are subsidising the poor,” she said.
Aftab, however, also pointed to a levy – 114 rupees ($0.41) for every litre – that the government charges. This, she said, was helping the government raise revenue. She said the government is now earning more than 100 billion rupees ($361m) a month from the levy, which is fuelling inflation.
“The levy was originally meant as a sort of environmental tax, to discourage the use of petrol. Now it has become a full revenue earner for the government, one that helps keep the fiscal deficit down,” the economist said.
What it costs and for how long
The Pakistani government has approved 75 billion rupees ($271m) for the scheme’s first three months, through November.
Petroleum Minister Ali Pervaiz Malik put the running cost at 25-30 billion rupees ($90m-$108m) a month at launch. By late September, he said, it had risen to 35-40 billion rupees ($126m-$144m).
Malik has said the government is prepared to run the scheme for up to 10 months, or “until the end of the war”, if needed.
Pakistan is currently under a $7bn International Monetary Fund programme, and an IMF team is in Islamabad this week for talks with the government as it seeks to keep its fiscal commitments on track while responding to the fuel shock.
Officials familiar with the government’s talks with the IMF say the Fund wants relief capped at three months and routed instead through the Benazir Income Support Programme, the country’s main cash-transfer scheme.
Khawaja said the IMF’s position from the outset was that relief had to be targeted, not universal, which was why the scheme was built around actual token use rather than a blanket price cut.
Who it leaves out
But there are claims that the relief is not reaching all. Cars with engines larger than 800cc, diesel vehicles and public transport are excluded entirely, leading some experts to suggest that the subsidy scheme risks missing the most vulnerable sections of Pakistani society.
“A poor household that uses public transport, walks to work, or relies on diesel-powered transport may receive nothing while still facing higher food and transport costs,” Khaqan Najeeb, a former adviser in Pakistan’s Ministry of Finance, told Al Jazeera.
More than 8.1 million tokens had gone to two- and three-wheelers by late September, compared with fewer than 380,000 for cars, Malik said. A November 2024 Gallup Pakistan survey found that 79 percent of respondents, in rural and urban areas alike, said they use public transport such as buses or wagons.
Does the relief go far enough?
At 100 rupees a litre, the maximum monthly saving is 2,000 rupees ($7.20) for a motorcycle user and 3,000 rupees ($10.80) for an eligible car owner, Najeeb said, calling it “useful household relief, but not enough to offset the broader cost-of-living shock”.
Petrol has climbed from 266 rupees ($0.96) a litre before the war to nearly 395 rupees ($1.42), despite a partial rollback in April. Inflation rose to 10.3 percent in September from 7 percent in February, Najeeb said.
Sajid Amin Javed, a senior economist at the Sustainable Development Policy Institute in Islamabad, said the relief was “minimal”, but added that this was understandable given the IMF constraints on Pakistan.
“The relief is minimal, and that is understandable as we are in an IMF programme,” Javed told Al Jazeera, arguing that cutting the petroleum development levy, which still adds 114 rupees to every litre, would deliver broader relief than a capped subsidy.
“The government is using the petroleum development levy to fill its revenue gap, but that comes at a significant cost in terms of inflation, growth and household welfare,” Javed said.
Najeeb, however, argued the scheme should not become a permanent fixture of Pakistan’s energy policy – and should be used only to make oil price shocks “less damaging”.
