- Finance Ministry has not received any proposal to remove Rs 5 MDR on UPI at fuel stations
- NPCI stated fuel UPI payments above Rs 2,000 attract Rs 5 MDR, below Rs 2,000 remain zero MDR
- Finance Ministry said UPI subsidies will continue and 0.4% MDR is insufficient for ecosystem
The Ministry of Finance has not received any proposal from the Ministry of Petroleum to remove the flat Rs 5 Merchant Discount Rate (MDR) on UPI transactions at fuel stations, official sources said on Thursday.
The NPCI has clarified earlier that fuel purchases via Unified Payments Interface (UPI) above Rs 2,000 will attract the concessional Rs 5 flat MDR, while payments below Rs 2,000 will continue to carry zero MDR.
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As per sources, the Finance Ministry said that the government will continue UPI subsidies, adding that a 0.4% MDR will not be sufficient to run the UPI ecosystem.
Petrol pump dealers on Sept. 16, 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 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.
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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.
AIPDA President Ajay Bansal said dealer margins are determined by oil marketing companies under the guidance of the Ministry of Petroleum and Natural Gas. The margins are primarily fixed on a per-litre basis rather than as a percentage of the transaction value, limiting dealers' ability to offset additional payment processing costs.
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