The tragedy came one day before Pakistan was due to begin Eid ul-Fitr celebrations marking the end of the holy fasting month of Ramadan, with many roads crowded as people travel home for the holidays.

Images of the crash showed rising flames and a thick plume of smoke, along with charred vehicles. The crash happened near the town of Ahmedpur East, some 670 kilometres (416 miles) south of the capital Islamabad.

"At least 123 people have been killed and more than 100 wounded in a fire which erupted after an oil tanker turned over and victims rushed to collect spilt fuel," senior local government official Rana Mohammad Saleem Afzal told state television.

The military said it was sending army helicopters to evacuate the wounded and hospitals were put on high alert. The nearest burn centre is believed to be more than 150 kilometres away.

Prime Minister Nawaz Sharif expressed his grief and directed the government of Punjab province, run by his brother Shabhaz Sharif, to provide "full medical assistance".

Pakistan has an appalling record of fatal traffic accidents due to poor roads, badly maintained vehicles and reckless driving.

At least 62 people including women and children were killed in southern Pakistan in 2015 when their bus collided with an oil tanker, starting a fierce blaze that left victims burnt beyond recognition.

The country has also long struggled to contain a chronic energy crisis, with regular blackouts suffocating industry and exacerbating anger against the government.