All India Petroleum Dealers Association (AIPDA) has requested the government on Wednesday to exempt petroleum retail outlets from any Merchant Discount
Rate (MDR) or other transaction charges on UPI payments, particularly for transactions exceeding Rs 2,000. The association said, "Petrol and diesel are essential commodities, and fuel purchases are inherently high-value transactions. Consequently, payments exceeding Rs 2,000 are routine at petrol pumps, making UPI one of the most widely used digital payment modes by customers." This comes after the government announced to revise the digital payments framework, paving the way for a new MDR structure on select UPI transactions above Rs 2,000 from October 15. AIPDA noted that the financial structure of petroleum dealerships makes this issue particularly significant. "Dealer margins are determined by the Oil Marketing Companies (OMCs) under the guidance of the Ministry of Petroleum and Natural Gas and are primarily fixed on a per-litre basis, rather than as a percentage of the transaction value. Dealers therefore have no mechanism to increase their earnings in proportion to the value of a transaction," it said. "It is also pertinent to highlight that the dealer margin has remained substantially unchanged since October 2017, despite significant increases in operating costs, wages, electricity, statutory compliance and other expenses. The dealer community has been continuously taking up the matter of margin revision with the OMCs; however, no satisfactory resolution has been reached to date," the association opined. As per the association, even a seemingly small fixed charge of Rs 5 on UPI transactions above Rs 2,000 could have a significant cumulative impact. "Petrol pumps process a very large number of transactions every day, and the multiplication of even a small charge across thousands of transactions would create a significant recurring financial burden. A percentage-based MDR of up to 0.4 per cent would be even more disproportionate to the economics of petroleum retailing. The petroleum dealer community has historically raised similar concerns regarding MDR on card-based fuel transactions, and appropriate relief/exemptions have been provided in recognition of the unique nature of fuel transactions. The same principle should apply to UPI payments for petrol and diesel," it said. "Such charges could also create an undesirable situation in which dealers are compelled to discourage or restrict UPI payments above a particular threshold merely to protect their already thin margins. This would be contrary to the Government’s broader objective of promoting digital payments, transparency and ease of transactions," it added. The association said that the petrol pumps provide an essential public service and operate continuously to meet the mobility and transportation requirements of the country. :Digital payments have significantly enhanced customer convenience, transaction transparency and operational efficiency in fuel retailing. Petroleum dealers should therefore not be financially penalised for facilitating and encouraging such digital transactions," it added. MDR Charges Above Rs 2,000 Meanwhile, on Tuesday, the government has introduced changes to the digital payments framework that will allow a new Merchant Discount Rate (MDR) structure for select UPI transactions above Rs 2,000 from October 15. While UPI payments up to Rs 2,000 will continue to remain free of MDR, certain higher-value merchant transactions will attract a charge of up to 0.4 per cent, depending on the transaction category. Person-to-person (P2P) UPI transfers will remain free, irrespective of the amount involved, meaning the proposed changes are primarily relevant to eligible merchant payments. The revised framework is introduced to create a mechanism for charging certain high-value merchant transactions while retaining zero-cost UPI payments for consumers in specified categories.
