UPI transaction charges: Petrol pump dealers seek full MDR exemption on payments above ₹2,000

UPI transaction charges: Petrol pump dealers have requested government intervention to eliminate MDR on UPI transactions exceeding ₹2,000, arguing that high fees undermine their income and run counter to efforts to promote digital payments.

The All India Petroleum Dealers Association has appealed to the Union Finance Minister for an immediate waiver of Merchant Discount Rate (MDR) charges on UPI payments exceeding ₹2,000.

In a formal letter sent on Wednesday, Association President Ajay Bansal urged government intervention regarding high payment processing fees.

The association emphasised that because dealer earnings are based on fixed per-litre margins rather than overall transaction values, percentage-based transaction levies directly deplete their net income.

Quick answers to key questions

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QUESTIONS

The proposed UPI transaction charges for payments exceeding ₹2,000 include a Merchant Discount Rate (MDR) of 0.4%, capped at a maximum fee of ₹300 for transactions of ₹75,000 and above.

Petrol pump dealers argue that high MDR charges deplete their earnings since their commissions are fixed per litre, not as a percentage of transaction value, putting financial strain on their operations.

The new UPI MDR framework could discourage petrol dealers from facilitating UPI payments over ₹2,000, which may undermine the government's goal of expanding digital payment adoption.

Consumers should not be concerned about paying UPI transaction fees, as the National Payments Corporation of India (NPCI) has clarified that consumers will continue to make UPI payments without charges.

The Association has called for either a complete exemption from all MDR and transaction fees for UPI payments or specific exemptions for payments over ₹2,000 to maintain business viability.

Highlighting their financial strain, the association pointed out that dealer commissions have not been updated since October 2017. Over the same period, key operational overheads—including electricity bills, staff wages, and compliance expenditures—have surged significantly.

Although pump owners have repeatedly engaged with oil marketing companies to resolve the matter, these negotiations have yielded no results, leaving operators with increasingly razor-thin profit margins.

"Dealer margins are determined by the Oil Marketing Companies (OMCs) under the guidance of the Ministry of Petroleum and Natural Gas and are primarily fixed on a per-litre basis, rather than as a percentage of the transaction value. Dealers therefore have no mechanism to increase their earnings in proportion to the value of a transaction," the association said in the letter.

"Even a seemingly modest fixed charge of ₹5 per UPI transaction above ₹2,000 would have a substantial cumulative impact. Petrol pumps process a very large number of transactions every day, and the multiplication of even a small charge across thousands of transactions would create a significant recurring financial burden. A percentage-based MDR of up to 0.4% would be even more disproportionate to the economics of petroleum retailing," the letter added.

Fuel retailers argued that the payment channel a customer uses does not change the basic nature or profitability of a fuel sale.

They pointed out that the government has previously recognised the unique economics of petroleum retail by granting special card-payment exemptions—a policy framework that dealers contend should logically apply to high-value UPI transactions today.

The association warned that unmitigated processing fees might force dealers to cap or discourage UPI payments above certain limits simply to safeguard their livelihoods. Such restrictions would directly undermine the central government’s larger mission to expand digital payment adoption, enhance transaction transparency, and improve consumer convenience.

Key Demands Submitted to the Ministry

To maintain business viability across retail outlets, the association submitted two specific solutions to the Centre:

• Grant a complete, blanket exemption from all MDR and associated transaction fees on every UPI payment processed at retail outlets, regardless of the transaction size.

Alternatively, if a standard industry threshold is maintained, provide petrol pumps with explicit exemptions from both percentage-based MDR and fixed fees for UPI transactions above ₹2,000.

"Digital payments have significantly enhanced customer convenience, transaction transparency and operational efficiency in fuel retailing. Petroleum dealers should therefore not be financially penalised for facilitating and encouraging such digital transactions," the letter said.

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