Petrol pump dealers have urged the government to exempt fuel retailers from the newly introduced Merchant Discount Rate (MDR) on UPI, arguing that even a small payment charge could put additional pressure on already narrow margins.
The All India Petroleum Dealers Association (AIPDA) has written to Finance Minister Nirmala Sitharaman seeking an exemption from MDR on UPI payments at petrol pumps, irrespective of transaction value.
The demand comes after the government announced a 0.4% MDR on specified merchant UPI payments above Rs 2,000, while fuel transactions above the threshold will attract a flat Rs 5 MDR from October 15.
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AIPDA said fuel purchases are routinely high-value transactions, making UPI an important payment option for customers. It argued that petrol and diesel dealers operate on prescribed margins and cannot simply increase selling prices to recover digital payment costs.
The association said dealer margins have remained largely unchanged since October 2017, while expenses such as wages, electricity and regulatory compliance have increased. It warned that even a Rs 5 charge on each eligible UPI transaction could accumulate into a high cost for fuel retailers.
The association has therefore sought exemption from both fixed charges and percentage-based MDR for petroleum outlets. It said the proposed charge is disproportionate to the economics of fuel retailing.
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The issue could also affect consumer payment choices. Dealers have warned that if the exemption is not granted, some fuel stations may discourage or stop accepting UPI payments above Rs 2,000 to protect their margins.
NPCI has clarified that fuel purchases above Rs 2,000 will attract the concessional Rs 5 flat MDR, while payments below Rs 2,000 will continue to carry zero MDR.
The government has said MDR is a merchant-side payment ecosystem charge, not a tax on consumers.
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