Petrol pump dealers oppose ₹5 UPI MDR, warn of cash-only payments for big transactions

Petrol pump dealers across India have warned that they could stop accepting UPI payments of ₹2,000 and above if they are required to pay a flat ₹5 merchant discount rate (MDR) on such transactions.

Dealers argue that the additional charge could put further pressure on their already narrow profit margins, according to a report by Hindustan Times.

Dealers from Delhi-NCR, Punjab, Uttar Pradesh, Mumbai, Karnataka and Rajasthan told Hindustan Times that any MDR would add to their costs. Their margins are estimated at around ₹2.40-₹3.40 per litre and are determined through oil marketing companies (OMCs).

“We may have to stop accepting UPI payments of ₹2,000 and above if exemption is not allowed to fuel retailers,” Federation of All India Petroleum Traders (FAIPT) spokesperson Monty Sehgal said.

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The concern stems from the introduction of a flat ₹5 MDR for fuel purchases above ₹2,000 made through UPI. The National Payments Corporation of India (NPCI) has described the charge as a concessional rate intended to protect petrol pump operators from potentially higher processing costs on large-value transactions.

Dealers seek complete MDR exemption

The Akhila Karnataka Federation of Petroleum Traders (AKFPT) has also approached the Centre and state-run oil marketing companies seeking an exemption. The association said petrol pumps operate differently from ordinary retail businesses because dealers have limited control over fuel pricing.

“The selling prices of petrol and diesel are determined by the respective Oil Marketing Companies, and petroleum dealers operate on a prescribed dealer commission and margin structure. A dealer does not have the freedom to increase the Retail Selling Price of petrol or diesel merely because the cost of accepting a particular digital-payment mode increases,” the federation said in a letter reviewed by Hindustan Times.

The scale of the potential impact was highlighted by Hemant Sirohi, a Uttar Pradesh-based dealer and member of the Empowering Petroleum Dealers Foundation (EPDF).

“A quick calculation of available official UPI transaction data shows that country-wide petrol pumps undertake 23.9 million such payments worth ₹1,573 crore. About 20% of such transactions are above ₹2,000, having a financial implication of ₹230-250 per day on a petrol pump,” Sirohi said.

The All India Petroleum Dealers Association (AIPDA) has separately written to the government seeking a complete exemption from MDR for UPI transactions above ₹2,000. The association said fuel purchases are inherently high-value transactions, making payments above the threshold routine at petrol stations.

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What NPCI says

According to NPCI's FAQs, fuel purchases above ₹2,000 at petrol stations will attract a flat concessional MDR of ₹5. Transactions below ₹2,000 will continue to have zero MDR.

“Fuel purchases made at petrol stations via UPI qualify for the flat concessional rate of ₹5 for payments over ₹2,000. The flat ₹5 fee protects petrol pump operators from high processing fees on tank refills,” NPCI said.

“For all fuel payments under ₹2,000, the MDR remains at 0%, ensuring everyday commuter refuelling is completely charge-free,” NPCI added.