Petroleum dealers voice concern over MDR, E20 and rising operating costs

The United Petroleum Dealers Association (UPDA) has expressed serious concerns regarding the proposed implementation of Merchant Discount Rate (MDR) charges on UPI transactions. UPDA president Tom Scaria stated that such charges could further diminish dealer earnings in the already low-margin fuel retail business. Despite promoting digital payments like UPI, transferring MDR costs to dealers could financially burden them, as they are already struggling with low margins.

Additionally, the introduction of E20 petrol has created new operational challenges for dealers. To handle the higher ethanol content, many existing outlets require significant investments in infrastructure, leading to concerns about storage, handling, equipment compatibility, and material durability. Limited public awareness of E20 fuel compatibility with vehicles has also contributed to operational difficulties and customer concerns.

Another major issue highlighted by Scaria is the rapid increase in retail outlets without proper market demand assessment, causing market saturation in several regions and reducing per-outlet sales volumes. This saturation, particularly in rural and semi-urban areas, has threatened the economic viability of existing dealerships, resulting in numerous closures.

UPDA argues that dealer commissions have only increased by around 30 paise per litre over the past nine years, which they consider insufficient compared to the substantial rise in operating costs. Fixed and operating expenses, including labor costs and electricity expenses, have also risen due to statutory wage revisions, compliance requirements, and the growing use of automated systems.

The combination of stagnant dealer commissions, rising operating expenses, declining sales volumes, E20 fuel challenges, and the proposed MDR on UPI transactions has placed petroleum dealers under considerable financial pressure. Consequently, UPDA has called for urgent policy attention to address these concerns and safeguard the economic viability of petroleum dealerships.