Over 9.5 million Pakistanis receive fuel subsidy, but those who need it most are left out

Islamabad, Pakistan – More than 9.5 million people have received subsidized petrol under a special fuel support program launched by Pakistan's prime minister, Federal Minister Shaza Fatima Khawaja told Al Jazeera on Wednesday.

The low-income initiative was introduced as the government sought to help households cope with fuel price increases tied to the conflict in Iran.

The program, launched in September, cuts 100 rupees ($0.36) per liter of petrol for owners of motorcycles, rickshaws and small cars, delivered through a text-message system.

Petrol prices have risen nearly 50 percent since the conflict erupted on February 28, deepening Pakistan's economic hardship and piling pressure on consumers already struggling with rising inflation.

How the program works

According to Khawaja, the minister for information technology and telecommunications, registrants send their national identity card number, vehicle registration and province of residence to the number 9771. A second message, sent before each refueling, generates a code usable at any petrol station nationwide.

Two- and three-wheelers receive 500 rupees ($1.80) a week, capped at four codes a month. Cars up to 800cc get 1,000 rupees ($3.60) every 10 days, up to three codes a month.

After numerous complaints, a registration fee was scrapped, and a requirement to buy a minimum of 5 liters was also dropped for the same reason.

Khawaja said the system was redesigned based on users' real-world experience. Riders no longer need a vehicle registered in their own name, provided they supply the correct registration date shown on the documents.

"Even in my own home there is a motorcycle registered to the family that our cook uses for daily work," Khawaja said, explaining why the ownership requirement for two- and three-wheelers was dropped on September 20.

According to her, an earlier cash transfer program in April reached only just over one million motorcycle owners, largely because disbursement required a bank account that most riders do not have.

'Support at an acceptable level'

Government officials insist the program has been expanded to more segments of society, especially those who depend on vehicles to earn a living.

"It helps, it's not nothing," Shakeel Ahmed, 45, an electrician in Islamabad, told Al Jazeera. "The support is acceptable for an ordinary user who travels short distances. But for people like us, who spend 1,000 to 1,500 rupees ($3.60-$5.40) a day on petrol, it isn't enough."

Economist Safiya Aftab said the program has reached its intended target. "The program has genuinely reached lower-income groups, who typically use two-wheelers and 800cc cars. So it is indeed a good thing that they are subsidizing fuel for the poor," she said.

However, Aftab also pointed to the 114 rupee ($0.41) per liter levy the government collects. According to her, this levy helps the government raise revenue. She said the government now collects more than 100 billion rupees ($361 million) a month from the levy, contributing to inflation.

"The levy was initially seen as a kind of environmental tax, aimed at curbing petrol use. Now it has become a substantial revenue source for the government, helping keep the fiscal deficit low," the economist said.

Cost and duration

Pakistan's government has approved 75 billion rupees ($271 million) for the first three months of the program, which runs through the end of November.

Petroleum Minister Ali Pervaiz Malik said operating costs stood at 25-30 billion rupees ($90-$108 million) a month at launch. By the end of September, he said, the figure had risen to 35-40 billion rupees ($126-$144 million).

Malik said the government is prepared to keep the program going for up to 10 months, or "until the conflict ends," if needed.

Pakistan is currently in a $7 billion International Monetary Fund (IMF) program, and an IMF team is in Islamabad this week for talks with the government as the country seeks to honor fiscal commitments while responding to the fuel shock.

Officials familiar with the IMF negotiations said the Fund wants the support package limited to three months and shifted to delivery through the Benazir Income Support Program, the country's main cash transfer scheme.

Khawaja said the IMF's position from the outset was that support must be targeted, not universal, which is why the program was built around actual usage codes rather than blanket discounts.

Who is left out

Yet critics argue the support does not reach everyone. Cars above 800cc, diesel-powered vehicles and public transport are entirely excluded, leading some experts to say the subsidy program risks missing the most vulnerable groups in Pakistani society.

"A poor household using public transport, walking to work, or depending on a diesel vehicle may receive nothing while still facing higher food and transport costs," Khaqan Najeeb, a former adviser to Pakistan's finance ministry, told Al Jazeera.

According to Malik, by the end of September more than 8.1 million codes had been issued for two- and three-wheelers, compared with fewer than 380,000 for cars. A Gallup Pakistan survey in November 2024 found that 79 percent of respondents, in both rural and urban areas, said they use public transport such as buses or coaches.

Does the support go far enough?

According to Najeeb, at 100 rupees per liter, maximum monthly savings come to 2,000 rupees ($7.20) for a motorcyclist and 3,000 rupees ($10.80) for an eligible car owner. He called this "useful support for households, but not enough to offset the broader cost-of-living shock."

Petrol prices have risen from 266 rupees ($0.96) a liter before the conflict to nearly 395 rupees ($1.42), despite a partial reduction in April. According to Najeeb, inflation rose to 10.3 percent in September from 7 percent in February.

Sajid Amin Javed, a senior economist at the Sustainable Development Policy Institute in Islamabad, said the support level is "minimal," but argued this is understandable given Pakistan's IMF constraints.

"The support is minimal, and that is understandable because we are in an IMF program," Javed told Al Jazeera, arguing that cutting the petroleum development levy – which still adds 114 rupees per liter – would deliver broader relief than a limited subsidy.

"The government is using the petroleum development levy to fill its revenue gap, but the cost is inflation, growth and household welfare," Javed said.

Najeeb, by contrast, argued the program should not become a permanent part of Pakistan's energy policy, but should only be used to make oil price shocks "less damaging."