UPI transaction charges: Petrol pump dealers seek full MDR exemption on payments above ₹2,000

The All India Petroleum Dealers Association has petitioned the Union Finance Minister for the immediate removal of Merchant Discount Rate (MDR) charges on UPI payments surpassing ₹2,000. In a formal letter, Association President Ajay Bansal appealed for government intervention to address high payment processing fees. The association highlighted that dealer earnings are based on fixed per-litre margins, not transaction values, making percentage-based transaction levies a direct hit to their net income.

For UPI transactions exceeding ₹2,000, the proposed MDR is 0.4%, with a maximum fee of ₹300 for transactions of ₹75,000 and above. Petrol pump dealers contend that high MDR charges erode their earnings, as their commissions are fixed per litre, not as a percentage of transaction value. The new UPI MDR framework could dissuade dealers from accepting UPI payments over ₹2,000, potentially undermining the government's objective of promoting digital payment adoption.

The National Payments Corporation of India (NPCI) clarified that consumers will not be charged for UPI transactions. The association urged either a complete exemption from all MDR and transaction fees for UPI payments or specific exemptions for payments exceeding ₹2,000 to preserve business viability. Dealers noted that their commission rates have remained unchanged since October 2017, while operational expenses such as electricity bills, staff wages, and compliance expenditures have soared.

Despite repeated discussions with oil marketing companies, no resolution has emerged, leaving operators with increasingly slim profit margins. Dealers earn their margins through fixed per-litre rates, not transaction values, leaving them no means to increase earnings proportionate to transaction value. A modest fixed charge of ₹5 per UPI transaction above ₹2,000 could have a substantial cumulative impact, given the large volume of transactions processed daily by petrol pumps.

The letter emphasized that the payment method a customer chooses should not affect the fundamental profitability of fuel sales. The government had previously acknowledged petroleum retail's unique economics by granting special card-payment exemptions, a policy the association believes should extend to high-value UPI transactions.

The association cautioned that unmitigated processing fees might compel dealers to limit or discourage UPI payments above certain thresholds to protect their livelihoods. Such restrictions would directly jeopardize the central government's goal of promoting digital payment adoption, enhancing transaction transparency, and improving consumer convenience.

The association proposed two solutions to the Central government: either exempt all UPI transactions above ₹2,000 from both percentage-based MDR and fixed fees, or maintain a specific industry threshold for exemptions.