New Delhi: A brewing dispute between fuel retailers and payment authorities over transaction fees is threatening to disrupt digital payments for motorists. Petrol pump associations across states like Madhya Pradesh and Punjab have warned that they will stop accepting Unified Payments Interface (UPI) transactions above Rs 2,000, citing the financial burden of newly imposed Merchant Discount Rate (MDR) charges.
The controversy stems from the National Payments Corporation of India’s (NPCI) revised MDR framework. Under the new rules, while UPI transactions up to Rs 2,000 remain completely free at petrol pumps, any payment exceeding this limit will attract a flat fixed charge of Rs 5 per transaction. Crucially, the NPCI has mandated that this fee cannot be passed on to the customer; it must be borne entirely by the petrol pump dealers.
Dealers argue that absorbing this cost will severely dent their profitability because fuel retail operates on a fixed per-litre commission model, rather than a percentage of the total transaction value. For instance, in Delhi, the average dealer commission on petrol is roughly Rs 4.41 per litre. If a customer purchases petrol worth Rs 3,000, they receive approximately 29.37 litres, yielding a gross commission of about Rs 129.55 for the dealer. Deducting the Rs 5 MDR leaves the dealer with Rs 124.55.
While a Rs 5 deduction on a single high-value transaction might seem negligible, the cumulative impact is what has triggered the uproar. Petrol pump owners highlight that a busy outlet handles hundreds of such transactions daily. The Madhya Pradesh Petroleum Dealers Association recently noted that if an average of 100 customers make payments over Rs 2,000 at a single pump every day, the dealer faces a daily loss of Rs 500, translating to a substantial Rs 15,000 monthly hit.
In response, dealer associations have written to the Union Ministry of Petroleum and Natural Gas, the Ministry of Finance, and state-run oil marketing companies. They are demanding that retail petrol pumps be entirely exempted from UPI transaction charges, regardless of the payment amount. The associations point out that the government previously granted similar MDR exemptions for debit and credit card transactions at fuel stations, and the same relief should logically be extended to the rapidly growing UPI ecosystem.
Until a resolution is reached or an exemption is formally granted, several dealer bodies maintain their stance. They have warned that to protect their already thin operating margins, they will have no choice but to discourage or completely halt UPI acceptances above the Rs 2,000 threshold, urging customers to rely on cash or card payments for larger refuels instead.