New Delhi [India], September 16 : The All India Petroleum Dealers Association requests complete exemption of petrol pumps from MDR on UPI transactions above Rs 2000.
The association highlighted that levies on UPI payments directly erode dealer earnings, which operate on fixed margins rather than transaction values. The association’s President, Ajay Bansal, wrote a letter to the Finance Minister on Wednesday seeking intervention on payment processing costs.
"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 letter stated.
The association noted that these commissions have seen no upward revision since October 2017, even as operational expenses such as electricity, wages, and regulatory compliances rise steadily. Despite ongoing engagements with oil marketing firms, the issue remains unresolved, leaving dealers with thin earnings.
"Even a seemingly modest fixed charge of Rs 5 per UPI transaction above Rs 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.
The association maintained that the mode of settlement does not alter fuel transactions. It stressed that past precedents exist where the government acknowledged the distinct nature of fuel transactions and provided exemptions on card payments, a principle that dealers argue must extend to UPI payments as well.
The letter warned that, "Such charges could also create an undesirable situation in which dealers are compelled to discourage or restrict UPI payments above a particular threshold merely to protect their already thin margins. This would be contrary to the Government’s broader objective of promoting digital payments, transparency and ease of transactions." 
Urging relief, the association requested the Centre to grant an absolute exemption from MDR and associated transaction fees on all UPI transactions at retail outlets, irrespective of the amount. It also asks that if a general threshold is retained, retail outlets receive specific relief from both percentage-based MDR and fixed per-transaction charges on UPI payments exceeding Rs 2,000 to protect the viability of pump operations.
"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.