Mumbai petrol dealers have threatened to stop accepting UPI payments from October 15 over the revised MDR framework. They have sought an exemption from the charges, citing pressure on margins. The official framework provides for a flat Rs 5 MDR on fuel transactions above Rs 2,000, while customers are not to be charged directly.
Petrol pump owners in Mumbai have threatened to stop accepting UPI payments from October 15 if the Centre does not exempt fuel retailers from the revised merchant discount rate (MDR) on person-to-merchant transactions above Rs 2,000.
The Petrol Dealers Association of Mumbai has written to the Reserve Bank of India (RBI) and the Finance Ministry, seeking a complete waiver for petrol pumps.
Revised MDR Regime
The representation follows the Finance Ministry’s announcement of a revised MDR regime under which a uniform 0.4% charge will apply to P2M UPI transactions above Rs 2,000, with exceptions for small vendors and micro merchants.
Petrol dealers said the charge would put pressure on their already limited margins as fuel prices are regulated and transaction costs cannot simply be passed on to customers.
“Our retail outlets have achieved over 60% digitalisation of all fuel and diesel sale transactions through intensive infrastructural deployment under the explicit assurance of a zero-MDR environment. However, the revised implementation creates an existential crisis for retailers due to multiple critical constraints,” said Chetan Modi, president of the Petrol Dealers Association of Mumbai.
Dealers Cite Rising Costs
The association said petrol pumps have invested heavily in digital payment infrastructure as part of the Digital India push. Dealers also pointed out that their commission margins have remained largely unchanged for years while operational and compliance costs have increased. Even a concession on the proposed MDR, they said, would result in a substantial revenue outgo and further squeeze their margins.
UPI Withdrawal May Hit Motorists
The threat of withdrawing UPI payments could affect thousands of motorists who have increasingly shifted to digital payments. Bunty Singh, a vehicle owner from Poisar, said the move would inconvenience motorists who do not routinely carry cash.
“I often step out of the house without so much as a wallet and very little petty cash. A stoppage on UPI payments at petrol pumps would translate to more inconvenience for me,” he said.
The issue has also raised concerns in the transport sector. Bal Malkit Singh, adviser and former president of the All India Motor Transport Congress (AIMTC), said any additional transaction cost on fuel would ultimately affect transporters and consumers.
“Fuel prices are already under pressure due to the ongoing West Asia conflict, and any additional 0.4% surcharge on UPI fuel payments will further increase the cost burden on the transport sector,” he said.
He added that a shift back to cash could undermine the gains made in digital payments since demonetisation. “The transport sector largely depends on digital payments, including UPI for smaller vehicles. If a surcharge is imposed, it could push people back towards cash transactions and undermine the objective of Digital India,” he said.
