ISLAMABAD: Pakistani fuel dealers said Wednesday they would refuse to participate in a government petrol subsidy introduced to cushion lower-income motorists from price increases linked to the US-Iran war, citing concerns over reimbursements.

The dispute comes as Islamabad prepares to roll out nationwide a Rs75 billion ($271 million) relief program approved this week after the conflict disrupted regional energy supplies and pushed up fuel costs in import-dependent Pakistan.

Under the scheme, motorcycle and three-wheeler owners can receive a Rs100 ($0.36) per-liter subsidy on up to 20 liters of petrol a month, while owners of cars with engines up to 800cc are eligible for the same discount on up to 30 liters. The relief is limited to one vehicle per owner.

The government says the scheme will be available nationwide from midnight between Wednesday and Thursday, following an initial rollout in Islamabad. Deputy Prime Minister Ishaq Dar on Tuesday directed that payments to filling stations be settled within 24 hours through the State Bank of Pakistan.

But the Pakistan Petroleum Dealers Association (PPDA) said dealers had not been consulted before the scheme was announced and remained concerned about how money spent providing discounted fuel would be reimbursed.

“If the government wants to provide relief, it should do so from its own funds instead of tying up dealers’ money,” PPDA Chairman Malik Khuda Bakhsh said in a statement, warning dealers would shut down fuel stations across the country if authorities resorted to “coercion.”

PPDA Vice Chairman Tariq Hassan said the association had been trying to contact the government for three days and its members would not participate in the subsidy program when the nationwide rollout began:

“There are around 14,000 dealers across the country, and from tonight, they will not sell petrol under the relief package.”

The dispute comes as Pakistani motorists face a rapid rise in fuel costs amid elevated international oil prices. Regulators on Wednesday raised petrol prices by another Rs6.88 ($0.02) to Rs391.22 ($1.41) per liter and high-speed diesel by Rs5.62 ($0.02) to Rs421.45 ($1.52), the eighth consecutive increase.

Pakistan introduced the subsidy as part of efforts to protect lower- and middle-income households from the economic fallout of the Middle East conflict. The government has said the entire cost of the program will be borne by the federal government and beneficiaries will use a digital token system to claim discounted fuel at filling stations.

The PPDA called for a simpler mechanism that did not require dealers to finance the discount while awaiting reimbursement.

“If billions of rupees remain tied up for a long period under this scheme, who will compensate for the financial losses,” the association said, demanding greater clarity on how the system would operate.