Mumbai: Petrol pump dealers in Mumbai, Thane, Raigad and Palghar have opposed the revised Merchant Discount Rate (MDR) on UPI transactions and sought a complete exemption for fuel retailers, warning that they may discontinue UPI payment facilities at petrol pumps from October 15 if the issue is not resolved.

The Mumbai, Thane, Raigad and Palghar Petrol Dealers Association has approached the Reserve Bank of India (RBI) over the proposed charges, arguing that the additional transaction cost would further squeeze already tight margins in the fuel retail business.

The association represents dealers operating petrol pumps of Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), among other oil marketing companies.

Dealers seek complete exemption from MDR

Under the revised UPI framework, certain person-to-merchant transactions above Rs 2,000 will attract MDR from October 15. While the general MDR for eligible transactions is 0.4%, fuel transactions above the threshold fall under a concessional flat charge of Rs 5 per transaction. UPI payments up to Rs 2,000 and transactions covered under the zero-MDR framework for eligible small merchants will remain free.

Petrol dealers, however, have sought a complete exemption for fuel retailers.

The association said dealers had adopted digital payment systems when UPI transactions operated under a zero-MDR framework. It argued that introducing a cost now would place an additional financial burden on businesses that had already invested in digital payment infrastructure.

The dealers have also pointed to rising real estate, labour and compliance costs. According to the association, dealer commission margins on petrol and diesel have remained unchanged since 2017.

Dealers say fuel prices cannot absorb extra costs

A key concern raised by the association is that petrol pump operators have limited scope to recover payment-related costs from customers.

Unlike many other businesses, fuel retailers cannot simply add a transaction charge to the price of petrol or diesel, the association argued. It therefore believes the MDR would have to be absorbed by dealers, adding to their operating expenses.

The association said a typical petrol pump handles around 500 transactions a day, with roughly 80% of payments made digitally.

UPI accounts for around 60% of total transactions, according to the association, while credit cards and other digital payment methods account for the remainder of digital payments. Cash transactions make up approximately 20%.

Many fuel purchases cross Rs 2,000

The dealers have highlighted the relatively high value of fuel purchases as another reason for seeking an exemption.

According to the association, around 40% of UPI transactions at petrol pumps in Mumbai are above Rs 2,000, while the remaining transactions are below that level.

The proportion is reportedly higher at highway fuel stations, where around 60% of UPI transactions are above Rs 2,000.

This exposure to higher-value transactions means fuel retailers expect the revised MDR framework to have a noticeable impact on their payment costs.

Mumbai dealers warn of UPI withdrawal

The association has warned that dealers could collectively discontinue UPI payment facilities at petrol pumps across Mumbai from October 15 if fuel retailers are not exempted from the charges.

The warning does not mean that UPI payments will automatically stop at petrol pumps on October 15. Dealers have sought government and regulatory intervention before the implementation date and have indicated that withdrawal of the facility would be considered if their demand is not accepted.

The issue could affect customers who routinely use UPI for fuel purchases, particularly in Mumbai where digital payments are widely used.

Association represents dealers across the region

The association said it has around 150 public-sector oil company dealer members in Mumbai, compared with roughly 200 petrol pumps in the city.

Thane and Palghar together have around 550 petrol pumps, according to figures cited in the association’s letter. The organisation’s members include dealers operating outlets of IOCL, BPCL and HPCL, among other oil marketing companies.

The association has urged the RBI to intervene and provide a complete exemption for fuel retailers.

The demand comes amid wider opposition from fuel dealers to the revised UPI MDR framework. Petrol pump operators in other parts of the country have also threatened to restrict UPI payments above Rs 2,000 if the charges are not withdrawn or waived.

For now, UPI payments continue to be available at petrol pumps, and any withdrawal from October 15 would depend on whether the dealers’ demand for an exemption is accepted.