ISLAMABAD: Pakistan's top economic decision-making body on Monday approved Rs75 billion [$271 million] for a fuel subsidy scheme, the Finance Division said, as Islamabad attempts to mitigate the impact of the inflationary pressure created by the US-Iran war.

Prime Minister Shehbaz Sharif announced a subsidy of Rs100 [$0.36] per liter on petrol for owners of two-wheelers and three-wheelers such as motorcycles, rickshaws and qingqis. The government announced that owners of vehicles up to 800 cc will also be eligible to avail the scheme. 

Pakistan has consistently raised fuel prices as the Middle East conflict intensifies. The latest increase in fuel price came on Friday as the government hiked the cost of high-speed diesel to Rs403.32 [$1.46] per liter and petrol to Rs375.82 [$1.36] per liter. 

Finance Minister Muhammad Aurangzeb chaired a meeting of the Economic Coordination Committee (ECC) on Monday to review the summary by the Petroleum Division. 

"The ECC approved an amount of Rs75 billion as TSG for the implementation of the scheme," the Finance Division said. 

The US-Iran war has caused oil prices to increase over the last few weeks as fighting intensifies. Oil prices jumped more than two percent on Monday, after new Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns following the closure of a key Saudi oil pipeline.

Brent crude futures rose $2.90, or 2.77 percent, to $107.51 per barrel as of 2313 GMT. West Texas Intermediate futures rose $2.27, or 2.27 percent, to $102.32 per barrel. 

Oil surged 8 percent higher last week due to the disruptions, rising above $100 for the first time since July.

The government has announced a Rs100 [$0.36] subsidy on 20 liters of petrol per month for two-wheelers and three-wheelers. These include motorcycles, rickshaws, and qingqis. Similarly, owners of small vehicles of up to 800cc will be provided the same subsidy on 30 liters of petrol per month.

The statement said the scheme will be restricted to non-commercial users, with relief limited to one vehicle per user or owner. 

"The Ministry of IT & Telecom will deploy and manage the Fuel Pass System (FPS) for digital management and transparent delivery of the relief," the statement added.

'FUEL DRY-OUTS'

Petroleum Minister Ali Pervaiz Malik said Pakistan's government is working to avoid a shortage of fuel in the country as the US-Iran war disrupts global fuel supplies. 

"The government has tried to protect the people from being burdened excessively at this time and has tried to stand in the way of this storm to protect them," Malik said at a joint press conference with other federal ministers.

"The government is trying to make sure that there are no dry-outs in the last round."

He said the government wanted to provide relief to salaried and middle-class people in a dignified manner.

"They will be able to get fuel at approximately the same price that existed before the war, while the government is purchasing fuel at twice that price," Malik said, adding that private-sector refineries had positively responded to their request to change the pricing formula for refined products.

To avail subsidy, people can register them by sending a text message to 9771 along with details, including computerized identity card number, registration number of vehicle, province or region where it is registered, and the registration date of the vehicle.

This is the second fuel subsidy announced by Islamabad this year due to the ongoing US-Iran war. Pakistani federal and provincial authorities announced multi-level relief in April to protect consumers from surging fuel costs, rolling out free transport, fare freezes and targeted subsidies as global oil prices rose.