Mumbai petrol pumps may stop accepting UPI payments from October 15 if the Centre does not exempt fuel retailers from the revised merchant discount rate (MDR) on transactions above Rs 2,000, the Petrol Dealers Association of Mumbai has warned. The association has asked the Reserve Bank of India and the Union Finance Ministry to withdraw the charge for petrol pumps.
The association wrote to the two authorities on Wednesday, saying fuel retailers would be forced to discontinue UPI facilities if the revised charges were not rolled back. The warning could affect customers who rely on digital payments for fuel purchases across the city, particularly for transactions that exceed the new threshold.
The Centre has introduced a 0.4 percent MDR on person-to-merchant UPI transactions above Rs 2,000. The policy provides exemptions for certain small and micro merchants, but petrol pumps have raised concerns because fuel purchases frequently cross the threshold.
According to the association, more than 60 percent of fuel sales at its outlets are now completed through digital payments. Petrol dealers said this level of adoption followed investments in payment infrastructure made on the assurance that UPI transactions would remain within a zero-MDR regime.
“Our retail outlets have achieved over 60 percent digitalisation of all fuel and diesel sale transactions through intensive infrastructural deployment under the explicit assurance of a zero-MDR environment. However, the revised implementation creates an existential crisis for retailers due to multiple critical constraints,” Chetan Modi, president of the Petrol Dealers Association of Mumbai, said in the association’s representation.
The dealers said their commissions have remained unchanged for nearly a decade even as operating and compliance costs have increased. They also said fuel prices are regulated, limiting their ability to pass transaction charges on to customers. If the MDR is applied, retailers would therefore have to absorb the additional cost, according to the association.
The dispute highlights the dependence of Mumbai’s fuel retail network on digital payment systems. Petrol pumps have invested in point-of-sale equipment and related infrastructure while customers have increasingly shifted from cash to electronic payments. The association’s stated figure of more than 60 percent digital transactions indicates that any withdrawal of UPI facilities could require outlets and motorists to adjust payment practices quickly.
The concern is not limited to fuel retailers. A recent study by consumer community platform LocalCircles found that only 17 percent of surveyed merchants were willing to bear the 0.4 percent MDR on UPI transactions above Rs 2,000, while more than 41 percent opposed bearing the charge. The study was cited in the report on the petrol dealers’ representation.
The association has sought a complete waiver from the RBI and Finance Ministry. Its warning will remain subject to the response from the two authorities and any decision on the revised MDR before the October 15 deadline cited by the dealers.
