Petrol pump dealers seek full UPI MDR exemption on payments above Rs 2,000

The All India Petroleum Dealers Association has written to the Finance Minister seeking intervention over the payment processing costs. The letter was sent by association President Ajay Bansal on Wednesday.UPI payments above Rs 2,000 at petrol pumps will attract a flat Rs 5 charge instead of a percentage-based MDR of up to 0.4%.Petrol pump dealers have asked the government to exempt them from Merchant Discount Rate (MDR) on UPI payments above Rs 2,000, saying the charges could further squeeze their margins, according to ANI.The All India Petroleum Dealers Association has written to the Finance Minister seeking intervention over the payment processing costs. The letter was sent by association President Ajay Bansal on Wednesday.WHY DEALERS ARE SEEKING EXEMPTIONThe association said petrol pump dealers operate on fixed margins, rather than margins linked to the value of each transaction.“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,” the letter said. It added that dealers therefore have no way to increase their earnings when the value of a transaction goes up.According to the association, these commissions have not been revised since October 2017, while costs such as electricity, wages and regulatory compliance have continued to rise. Under the new MDR framework, which will take effect from October 15, 2026, certain merchant categories will pay a concessional flat MDR of Rs 5 per UPI transaction above Rs 2,000.Fuel is among the categories covered by this structure. Therefore, UPI payments above Rs 2,000 at petrol pumps will attract a flat Rs 5 charge instead of a percentage-based MDR of up to 0.4%.The association said that even a Rs 5 charge could have a sizeable impact because petrol pumps handle a large number of transactions every day.“Even a seemingly modest fixed charge of Rs 5 per UPI transaction above Rs 2,000 would have a substantial cumulative impact,” the letter said.It added that a percentage-based MDR of up to 0.4% would be even more disproportionate to the economics of petroleum retailing.DEALERS FLAG RISK OF DISCOURAGING UPI PAYMENTSThe association said the mode of payment does not change the nature of a fuel transaction. It also pointed to past instances where the government had recognised the distinct nature of fuel transactions and provided exemptions on card payments.The dealers said the same principle should apply to UPI payments.The letter also warned that the charges could create a situation where dealers may discourage or restrict UPI payments above a certain amount to protect their margins.“Such charges could also create an undesirable situation in which dealers are compelled to discourage or restrict UPI payments above a particular threshold,” the association said.According to the association, this would go against the broader objective of promoting digital payments, transparency and ease of transactions.WHAT PETROL PUMP DEALERS WANTThe association has asked the Centre to completely exempt retail petrol pumps from MDR and related transaction charges on all UPI payments, regardless of the amount.If a general threshold is retained, it has sought specific relief for fuel retailers from both percentage-based MDR and fixed per-transaction charges on UPI payments above Rs 2,000.The association said digital payments have made fuel purchases more convenient and transparent while improving operational efficiency, and dealers should not face an additional financial burden for facilitating them.- EndsPublished By: Jasmine anandPublished On: Sep 16, 2026 19:58 IST