Petrol pump dealers have urged the government to exempt fuel retail outlets from Merchant Discount Rate (MDR) charges on UPI transactions above ₹2,000, arguing that the proposed payment costs could put additional pressure on their already narrow margins.
The All India Petroleum Dealers Association (AIPDA) has written to Union Finance Minister Nirmala Sitharaman seeking intervention on the issue. The letter was sent by association president Ajay Bansal on September 16, according to ANI.
Why Petrol Pump Dealers Are Opposing UPI MDR
Petroleum dealers argue that their business model is different from that of ordinary retailers because their margins are largely determined on a per-litre basis rather than as a percentage of the value of a transaction.
According to AIPDA, this means dealers cannot increase their earnings when customers make larger-value purchases. The association said dealer commissions have not been revised since October 2017, while expenses such as electricity, wages and regulatory compliance have continued to rise.
The association has therefore argued that even a relatively small payment-processing charge could have a cumulative effect because petrol stations handle a large number of transactions every day.
₹5 MDR on Fuel Payments Above ₹2,000
Under the new UPI MDR framework, fuel purchases above ₹2,000 are set to attract a flat ₹5 MDR for merchants, while fuel payments below ₹2,000 will continue to have zero MDR. The new framework is scheduled to apply from October 15.
The government has clarified that MDR is a merchant-side payment ecosystem charge and not a fee directly imposed on consumers. NPCI has also stated that fuel transactions above ₹2,000 will qualify for the concessional flat ₹5 rate.
Dealers Seek Complete Exemption
AIPDA has requested an absolute exemption from MDR and related transaction charges for UPI payments at petroleum retail outlets, regardless of transaction value.
Alternatively, the association has asked the government to provide specific relief for fuel retailers on transactions exceeding ₹2,000, covering both percentage-based and fixed charges.
The association has warned that the additional cost could encourage some dealers to discourage or restrict UPI payments above the threshold. Other dealer bodies have similarly raised concerns that petrol pumps could move towards cash-only payments for higher-value transactions if the issue is not resolved.
What It Means for Customers
For consumers, the proposed MDR is currently structured as a merchant-side charge, meaning customers are not automatically required to pay an additional ₹5 when making a UPI fuel payment above ₹2,000.
However, if petrol pump operators decide not to absorb the cost, the availability of UPI for higher-value fuel purchases could become an issue at some outlets.
The dispute comes as UPI continues to expand across India’s retail economy. The Finance Ministry has said that UPI remains free for peer-to-peer transactions and the large majority of merchant transactions.
The petroleum dealers’ request will now depend on how the government responds to their demand for a sector-specific exemption before the new MDR framework takes effect.
