Pakistan's Fuel Subsidy Reaches 9.5 Million but Leaves Poorest Behind, Economists Warn

More than 9.5 million Pakistanis have begun receiving discounted petrol under a government relief scheme designed to cushion lower-income households from fuel prices that have surged by nearly half since the war on Iran began, a federal minister has told Al Jazeera.

The programme, introduced in September, offers a reduction of 100 rupees (about 36 cents) per litre of petrol to owners of motorcycles, rickshaws and small cars with engines up to 800cc, according to Shaza Fatima Khawaja, the minister for information technology and telecommunications. The initiative represents Islamabad's most ambitious attempt yet to shield vulnerable citizens from the economic shockwaves of the conflict that started on February 28.

The scheme operates through a text-message system that officials say was refined after early complaints from users. Applicants send their national identity number, vehicle registration details and province to a designated short code, 9771. Before each trip to a filling station, they send a second message that generates a token redeemable at pumps anywhere in the country.

Under the benefit structure, owners of two- and three-wheelers receive 500 rupees (roughly $1.80) per week, limited to four tokens each month. Motorists with cars of up to 800cc get 1,000 rupees (about $3.60) every ten days, for a maximum of three tokens monthly. The minister said registration fees were eliminated and a five-litre minimum purchase requirement was dropped after users raised concerns.

Khawaja emphasised that the system had been redesigned based on feedback from people on the ground. One notable change allows riders to claim relief even when the vehicle is not registered in their own name, provided they can supply the exact registration date printed on the documents. She illustrated the point by describing a motorcycle registered to her own household that is used by the family's cook for daily errands — a situation she said prompted authorities to drop the ownership requirement for two- and three-wheelers on September 20.

The minister contrasted the current programme with an earlier cash-transfer effort launched in April, which reached only slightly more than one million bike owners. That initiative largely failed because disbursement required a bank account that most riders did not possess, she explained.

Government officials argue the revamped scheme now covers broader segments of society, particularly people who rely on their vehicles to earn a living. But not all beneficiaries consider the support sufficient. Shakeel Ahmed, a 45-year-old electrician in Islamabad, said the relief helps for routine local travel but falls short for those who consume far more fuel. He noted that he spends between 1,000 and 1,500 rupees (about $3.60 to $5.40) on petrol every day, meaning the subsidy covers only a fraction of his costs.

Economist Safiya Aftab told Al Jazeera that the programme has indeed reached the low-income groups it was intended to serve — people who typically depend on two-wheelers and small-engine cars. She described the subsidisation of poorer citizens as a positive development. At the same time, she pointed to a government levy of 114 rupees (about 41 cents) per litre that is generating substantial revenue while contributing to inflation. According to Aftab, the levy now brings in more than 100 billion rupees (approximately $361m) each month.

She explained that the charge was originally conceived as an environmental tax to discourage petrol consumption, but it has evolved into a major source of government income that helps contain the fiscal deficit. The dynamic illustrates a tension at the heart of Pakistan's response to the fuel crisis: the state is simultaneously subsidising consumers and taxing them, with the net benefit to struggling households remaining uncertain.

The financial scale of the relief effort is significant and growing. The government has approved 75 billion rupees (around $271m) to fund the scheme's first three months, through November. Petroleum Minister Ali Pervaiz Malik initially estimated the running cost at 25 to 30 billion rupees (roughly $90m to $108m) per month, but by late September he said the figure had climbed to between 35 and 40 billion rupees (about $126m to $144m). Malik has indicated the government is prepared to sustain the programme for up to ten months, or until the war concludes, should circumstances require it.

Pakistan's fiscal position adds another layer of complexity. The country is currently operating under a $7bn International Monetary Fund programme, and an IMF team is in Islamabad this week for discussions with government officials. The talks aim to keep Pakistan's fiscal commitments on track while it manages the fuel shock. Officials familiar with the negotiations say the Fund wants the relief limited to three months and delivered instead through the Benazir Income Support Programme, the country's primary cash-transfer mechanism.

Khawaja said the IMF's position from the beginning has been that assistance must be targeted rather than universal — a principle that shaped the token-based design of the current scheme, which ties benefits to actual usage rather than offering a blanket price reduction.

Yet critics contend the relief still misses some of the most vulnerable Pakistanis. Cars with engines larger than 800cc, diesel vehicles and public transport are entirely excluded from the programme. Some experts warn that this structure risks overlooking the poorest citizens, who often depend on public transport and cannot afford even the smallest private vehicles. A poor household that relies on buses or shared transport receives no direct benefit, even as fuel costs drive up fares and overall living expenses.

The scheme's architects face a difficult balancing act. On one side, the IMF and fiscal realities demand narrowly targeted spending. On the other, the breadth of Pakistan's informal economy and the sheer number of workers who depend on vehicles for their livelihoods complicate efforts to identify and reach everyone in need. As the war on Iran continues to push energy prices higher, the pressure on Pakistan's government — and on the millions of households it is trying to assist — appears unlikely to ease.