Paying for fuel via UPI? Here's how much you'll be charged at petrol pumps

The government on Tuesday introduced new charges on large UPI merchant payments, but petrol pump customers will pay a flat ₹5 fee on transactions above ₹2,000.

The new framework sets a 0.4 per cent Merchant Discount Rate (MDR) on UPI payments above ₹2,000 to merchants, with the fee capped at ₹300 for payments of ₹75,000 and above.

However, some sectors will get concessional rates. Railways, telecom and fuel will attract a flat ₹5 fee per transaction, while capital-market payments will have a lower MDR of 0.02 per cent.

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How Much Will You Pay At Petrol Pumps?

The National Payments Corporation of India or NPCI, which developed and operates UPI, said fuel purchases made at petrol stations through UPI will attract a flat ₹5 MDR for payments above ₹2,000.

"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," the NPCI said.

For fuel payments below ₹2,000, MDR will remain zero. This means everyday refuelling transactions below that amount will continue to be charge-free.

The NPCI also clarified that fuel station operators will not face any MDR on these transactions.

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What About Insurance Payments?

Insurance premium payments made through UPI will also get a concessional rate.

For premiums above ₹2,000, a flat ₹5 MDR per transaction will apply instead of a percentage-based charge.

The NPCI said this would ensure that policyholders making high-value annual or semi-annual insurance payments do not face heavy backend fee friction. Insurance companies, meanwhile, would benefit from low-cost digital collections.

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Most UPI Transactions Remain Free

The Finance Ministry said the new framework will have no impact on person-to-person transactions.

UPI will remain completely free for P2P payments, irrespective of the amount transferred.

Merchant payments of up to ₹2,000 will also remain free, along with transactions covered under the zero-MDR framework for small merchants.

As a result, around 96 per cent of all person-to-merchant transactions will remain unaffected.

The new MDR will apply only to specified merchant transactions above ₹2,000.

Zero-MDR Regime Ends

The new framework ends the zero-MDR regime that has been in place since January 2020. The system was introduced to encourage digital payments but had long been criticised by banks and fintech companies as unsustainable.

The latest framework introduces differentiated rates for different categories of merchant payments while keeping person-to-person UPI transactions free.