Petroleum Dealers Seek Relief From Payment Costs, Demand MDR Exemption On Fuel Sales

Petroleum dealers have petitioned the government for an exemption from a Merchant Discount Rate (MDR) charge on Unified Payments Interface (UPI) transactions for petrol and diesel, expressing concern that the fee could erode already thin retail margins. The All India Petroleum Dealers Association met with officials from India’s Petroleum Ministry to discuss the ₹5 MDR imposed on fuel transactions surpassing ₹2,000.

Dealers highlighted the margin pressure on their operations, noting that petrol pumps sell fuel at regulated prices with prescribed commissions, leaving minimal room to absorb additional payment-processing costs. The association warned that transactions above ₹2,000 account for nearly 30–40% of total fuel purchases nationwide. The Petroleum Minister clarified that the MDR revenue is crucial for funding India’s UPI digital infrastructure and supporting the payment ecosystem.

According to the government, the flat fee is aimed at providing predictable costs for public services and businesses operating with narrow margins. The Finance Ministry explained that the MDR is not a tax but a distributed fee among banks, payment service providers, and UPI application companies to fund the development and expansion of digital payment infrastructure.

The petroleum dealers’ association expressed readiness for further dialogue with the government, seeking a solution that balances the interests of customers, fuel retailers, and participants in India’s UPI ecosystem. However, dealers emphasized the need for a complete MDR exemption for fuel sales, as petrol pumps cannot independently increase prices or easily pass the charge to consumers.