New Delhi: Petroleum dealers have sought an exemption from merchant discount rate charges on UPI payments for petrol and diesel, warning that the cost could squeeze narrow retail margins.
All India Petroleum Dealers Association officials met Petroleum Ministry officials to discuss the ₹5 MDR imposed on fuel transactions exceeding ₹2,000.
Dealers flag margin pressure
The association said petrol pumps sell fuel at regulated prices and earn prescribed commissions, leaving operators with limited room to absorb extra payment-processing costs.
According to dealers, transactions above ₹2,000 account for nearly 30–40% of purchases nationwide. Digital payments are important, particularly for customers making higher-value purchases.
Dealers said they had supported digital-payment adoption at petrol pumps nationwide for years.
Why MDR was introduced
Petroleum Ministry officials explained that MDR revenue was needed to fund India’s UPI digital infrastructure and support the payment ecosystem.
Under the new UPI framework, transactions above ₹2,000 in essential and low-margin sectors attract a flat MDR of ₹5. These sectors include fuel, railways, telecommunications, insurance and agricultural inputs.
The flat fee is intended to provide predictable costs for public services and businesses operating with thin margins.
Government clarifies MDR structure
The Finance Ministry has clarified that MDR is not a tax and is not collected by the government or the National Payments Corporation of India.
Instead, the fee is distributed among banks, payment service providers and UPI application companies to fund the operation and expansion of digital payment infrastructure.
Dialogue to continue
The petroleum dealers’ association said discussions with the government would continue. It expects a solution that balances the interests of customers, fuel retailers and participants in India’s UPI ecosystem.
Dealers maintain that a complete MDR exemption for fuel sales is necessary because petrol pumps cannot independently raise prices or easily pass the charge to consumers.
