By Staff Reporter
ISLAMABAD: The government is preparing to seek approval for a three-month, Rs75 billion fuel subsidy to cushion motorcycle riders and small-car owners from a surge in pump prices triggered by turmoil in the Gulf.
The Petroleum Division has submitted a summary to the Economic Coordination Committee of the Cabinet proposing targeted relief of Rs100 per liter for roughly 11.8 million users of two-wheelers, three-wheelers and cars with engines up to 800cc, according to the document. The scheme would need sign-off from the ECC, the cabinet body that vets major economic measures, before taking effect.
The proposal comes after domestic pump prices climbed sharply in recent months and then spiked further as international crude markets reeled from the Gulf crisis. Petrol prices rose 24% between July 1 and Sept. 11, climbing to Rs371 a liter from Rs299, the Petroleum Division said in the summary. High-speed diesel jumped 28% over the same period, reaching Rs398 a liter from Rs311.
The increases have been building since earlier this year. Petrol cost Rs266 a liter on March 1 and has risen a cumulative Rs105 since then. Diesel, the fuel that underpins freight and agricultural machinery costs across the country, has climbed Rs117 a liter over the same stretch.
The pace of the latest move was particularly sharp. On Sept. 11 alone, both fuels rose by Rs11.13 a liter — a 3.5% single-day jump for diesel and 3% for petrol — as the Gulf crisis rattled international markets.
Relief Targets Lower-Income Riders
The subsidy would work through monthly cap</br>s rather than a blanket price cut. Riders of motorcycles and three-wheelers could claim relief on up to 20 liters of fuel a month, worth as much as Rs2,000. Owners of small cars — those with engines up to 800cc, typically the most affordable segment of Pakistan’s auto market — could claim relief on up to 30 liters, worth up to Rs3,000.
The Petroleum Division’s own estimates put the beneficiary pool at 11.8 million people: 10 million motorcycle users, 800,000 three-wheeler users and 1 million small-car owners. Officials arrived at those figures by starting with a registered vehicle base of roughly 34 million two-wheelers and three-wheelers, then assuming a 40% retirement rate for vehicles no longer in use — leaving an operational fleet of about 20.6 million. The 10 million figure for motorcycle beneficiaries was drawn from the experience of a previous relief program.
The monthly cost of the subsidy has been estimated at Rs24.6 billion: Rs20 billion for motorcycles, Rs1.6 billion for three-wheelers and Rs3 billion for small cars.
In language rarely seen in a government budget document, the Petroleum Division warned of the political stakes involved. “There is visible public pressure and simmering unrest,” the division said in the summary, adding that the situation required policy action.
The Prime Minister subsequently ordered authorities to design a relief mechanism for the country’s poorest households, prompting a round of consultations led by the Deputy Prime Minister. Those talks brought together the Ministers for Petroleum, Economic Affairs, and IT and Telecom, along with senior officials from the Finance Division, the Ministry of IT and Telecom, the Petroleum Division, the Oil and Gas Regulatory Authority and the State Bank of Pakistan.
The design channels relief to individual users rather than vehicle owners, with only one vehicle permitted per claimant. To prevent duplicate claims, the system would cross-check a user’s national identity card number, vehicle registration and mobile phone number.
A New Digital Backbone
Delivering the subsidy will require Pakistan to stand up new digital infrastructure. The centerpiece is a Fuel Pass System, which would handle user registration, token issuance, validation and settlement, third-party verification and SMS-based services.
The government is seeking the full Rs75 billion for the subsidy itself through a Technical Supplementary Grant to the Ministry of Petroleum under Demand No. 36. A separate Rs1.73 billion has been requested through a similar grant to the Ministry of IT and Telecom to build and run the Fuel Pass System — covering call-center operations, SMS services, software development, and the verification modules needed to keep the program running.
The Ministry of IT and Telecom and its affiliated bodies may be authorized to invoke relevant procurement rules to fast-track the purchases needed to get the system operational, according to the summary.
The proposal was finalized jointly by the Petroleum Division and the Ministry of IT and Telecom, and has since been circulated to the Finance Division, the State Bank of Pakistan and OGRA for comment. The full package — the Rs75 billion subsidy, the Rs1.73 billion technology allocation, and the implementation framework — now awaits the ECC’s review.
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