Petrol dealers in Mumbai, Thane, Raigad and Palghar have opposed the new UPI Merchant Discount Rate (MDR) charges and urged the Reserve Bank of India to provide a complete exemption for fuel retailers. In a letter to the RBI, the Mumbai, Thane, Raigad and Palghar Petrol Dealers Association sought the central bank's intervention, warning that the new charges could disrupt fuel retail operations.
The association has warned that if the issue is not resolved, dealers could collectively discontinue UPI payment facilities across petrol pumps in Mumbai from October 15.
The association represents petrol pump dealers operating across the region, including members associated with Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), among others.
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According to the association, the proposed UPI MDR charges would add to the financial pressure faced by fuel retailers, whose commission margins on petrol and diesel have remained frozen since 2017. Dealers said rising real estate costs, compliance expenses and labour costs have further squeezed their margins.
They also highlighted that fuel retailers cannot pass transaction-related costs on to consumers as petrol and diesel prices are regulated.
The association therefore argued that imposing MDR on UPI transactions would create an additional cost for dealers without providing them the ability to recover it through fuel prices. The association said a typical petrol pump handles around 500 transactions a day, with approximately 80% of payments made through digital modes.
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Of the total transactions, around 60% are made through UPI, while credit cards and other digital payment methods account for the remaining digital transactions. Cash payments account for around 20% of transactions.
In cities such as Mumbai, around 40% of UPI transactions at petrol pumps are above Rs 2,000, while the remaining transactions are below the Rs 2,000 threshold, according to the association.
The proportion is even higher on highways, where around 60% of UPI transactions are above Rs 2,000. This makes fuel purchases particularly exposed to the new MDR framework, as petrol and diesel transactions frequently cross the Rs 2,000 threshold.
The association said petrol dealers adopted digital payment systems at a time when UPI transactions were operating under a zero-MDR framework.
It argued that the introduction of charges now would impose an unexpected cost on businesses that have invested in and adopted digital payment infrastructure.
The association has therefore sought a complete exemption from UPI MDR charges for fuel retailers and urged the RBI to intervene to prevent any disruption to fuel retail operations.
The Mumbai petrol dealers association has around 150 public sector members, compared with around 200 petrol pumps in the region. Thane and Palghar together have around 550 petrol pumps, all of which are under the association, according to the letter.
The association's membership includes dealers operating outlets of IOCL, BPCL and HPCL, among other oil marketing companies.
NDTV Profit reached out to IOCL, BPCL and HPCL for their comments on the dealers' concerns and the proposed discontinuation of UPI payments, but are yet to hear back.
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