Petrol and diesel dealers across India have urged the government to exempt fuel stations from the newly introduced Merchant Discount Rate (MDR) on UPI transactions above ₹2,000, warning that the additional cost could put further pressure on their already narrow margins.
The new UPI framework provides for a flat ₹5 MDR on fuel transactions above ₹2,000. Petrol dealers have argued that fuel retailing operates under a regulated pricing structure, with dealer commissions prescribed by oil marketing companies (OMCs), leaving them with limited flexibility to absorb additional payment-processing costs.
The Federation of Gujarat Petroleum Dealers Association, in a representation to the National Payments Corporation of India (NPCI), said fuel stations frequently process transactions above ₹2,000, making the additional charge a significant concern for dealers. The association has sought a mechanism through which the MDR is absorbed or reimbursed without placing the cost on petroleum retailers.
Dealers warn of UPI payment restrictions
Petroleum dealers have warned that they could reconsider accepting UPI payments of ₹2,000 and above if an exemption is not granted. Monty Sehgal, spokesperson for the Federation of All India Petroleum Traders, said dealers operate on narrow margins and that existing commissions have not kept pace with inflation and rising operating costs.
Industry associations have also asked the government to recognise petrol pumps as a special category of merchants because fuel prices and dealer margins cannot be independently adjusted by retailers.
Government explains new MDR framework
The revised UPI pricing framework announced on September 14 includes MDR on certain high-value person-to-merchant transactions. For specified sectors such as fuel, railways, telecom, insurance and agricultural inputs, the charge is set at a flat ₹5 for transactions above ₹2,000, rather than the standard percentage-based rate applicable to other eligible transactions.
The government has said the revised structure is intended to support the long-term sustainability of India's UPI payment infrastructure while maintaining relatively predictable costs for sectors with thin margins. The Finance Ministry has also clarified that MDR is a merchant-side payment-processing charge and not a fee charged to consumers for making UPI payments.
Government-dealer discussions continue
Senior officials from the Ministry of Petroleum and Natural Gas met representatives of the All India Petroleum Dealers Association on September 17 to discuss the dealers' concerns. The association said the discussions addressed its concerns and that dialogue with the government would continue, but no specific exemption has been announced so far.
The issue has gained importance as UPI has become a major payment method at petrol pumps, particularly for higher-value fuel purchases. Dealers are seeking a complete exemption from MDR, arguing that the additional cost should not be deducted from their prescribed commissions.
