The Ministry of Finance has not received any proposal from the Ministry of Petroleum to remove the flat ₹5 Merchant Discount Rate (MDR) on UPI transactions at fuel stations, according to official sources reported by NDTV Profit. This clarification comes as petrol pump dealers continue to urge the government for exemption from the newly introduced MDR charges on UPI payments. Finance Ministry sources emphasized that any proposal to scrap MDR on pump purchases has not reached the finance ministry yet, as reported by Moneycontrol.
The National Payments Corporation of India (NPCI) has clarified that fuel purchases via Unified Payments Interface (UPI) above ₹2,000 will attract the concessional ₹5 flat MDR, while payments below ₹2,000 will continue to carry zero MDR, as reported by NDTV Profit. This fee structure has become a point of contention among fuel retailers who argue it could impact their already narrow profit margins. The issue is significant for petrol pumps because a substantial share of fuel purchases can cross the ₹2,000 threshold, with dealers in several states raising concerns that the new charge would directly eat into their margins.
The Finance Ministry stated that the government will continue UPI subsidies, adding that a 0.4% MDR will not be sufficient to run the UPI ecosystem, according to sources reported by NDTV Profit. This position suggests the government views the current subsidy structure as necessary for maintaining the digital payment infrastructure across various sectors, including fuel retail. Government sources noted that the Petroleum Dealers' Association has commission-related issues, not MDR-related issues, with commission-related discussions currently being held between the Petroleum Ministry and dealers.
The All India Petroleum Dealers Association (AIPDA) has written to Finance Minister Nirmala Sitharaman seeking an exemption from MDR on UPI payments at petrol pumps, irrespective of transaction value, as reported by NDTV Profit. The association argues that fuel purchases are routinely high-value transactions, making UPI an important payment option for customers, and that dealers operate on prescribed margins that cannot be adjusted to recover digital payment costs. The Federation of Gujarat Petroleum Dealers Association has specifically highlighted that the petroleum retail industry operates under a unique pricing and regulatory framework, with dealer margins on petrol and diesel prescribed/fixed by the Oil Marketing Companies (OMCs).
The AIPDA warned that even a ₹5 charge on each eligible UPI transaction could accumulate into a high cost for fuel retailers, according to NDTV Profit. The association has sought exemption from both fixed charges and percentage-based MDR for petroleum outlets, arguing that the proposed charge is disproportionate to the economics of fuel retailing. According to Petroleum Planning and Analysis Cell (PPAC), dealers margin per litre of petrol is in the range of ₹3.14 to ₹4.40, which is fixed by oil marketing companies. Several dealer associations have therefore sought an exemption, with some threatening to stop accepting UPI payments above ₹2,000 if the charge is implemented, as reported by Moneycontrol.
