Petroleum dealers demand UPI fee exemption for fuel sales

Petroleum dealers in India are seeking a complete exemption from the Merchant Discount Rate (MDR) applied to UPI transactions exceeding Rs 2,000. The All India Petroleum Dealers Association (AIPDA) and the United Petroleum Dealers Association (UPDA) have engaged with the Ministry of Petroleum and Natural Gas and the Ministry of Finance to address concerns that these fees threaten their livelihoods.

Under the new framework, transactions above the Rs 2,000 threshold incur an MDR of approximately Rs 5 per transaction. Because fuel dealers operate on fixed commissions per liter rather than a percentage of the total sale, they cannot pass these costs on to customers by increasing fuel prices. Dealers argue that since high-value transactions account for 30-40% of total purchases, the cumulative cost significantly erodes their narrow margins.

In response to the impending changes, some regional groups, such as the Madhya Pradesh Petrol Pump Dealers Association, have announced they will refuse UPI payments for bills exceeding Rs 2,000 starting October 16 to avoid the extra expense. The Finance Ministry has clarified that MDR is not a government tax but a fee distributed among banks and payment providers to support the UPI digital infrastructure.