Petroleum dealers seek exemption from MDR on fuel sales

New Delhi: Representatives of the All India Petroleum Dealers Association (AIPDA) met senior officials of the Ministry of Petroleum and Natural Gas Thursday to discuss their demand for exemption from the merchant discount rate (MDR) on UPI transactions on fuel sales at petrol pumps.

The dealers’ body said in a statement that the issue was discussed with senior officials of the Petroleum Ministry as the additional MDR cost could put pressure on dealer margins, as retail fuel sales are made on prescribed commissions.

The new UPI framework levies an MDR of Rs 5 per transaction on petrol and diesel purchases above Rs 2,000. Such transactions account for around 30-40 per cent of total purchases across retail outlets in the country, according to dealers.

Petroleum Ministry officials sought to explain the rationale behind introducing MDR, which was required to support the development of the next layer of India’s UPI digital infrastructure.

“Petroleum dealers have been at the forefront of adopting digital payments and have worked closely with the government to promote their use across the country,” the AIPDA said.

The association said it expects to continue the dialogue with the government.

“We look forward to continuing the dialogue towards a mutually beneficial solution for consumers, petroleum dealers, and all stakeholders in India’s UPI ecosystem,” the statement said.

Dealers have raised concerns as digital payments have become an important mode of payment at petrol pumps, particularly for higher-value purchases.

Petroleum dealers have sought a complete exemption for fuel retail transactions, citing the nature of their business and the impact of MDR-related costs on their margins.

The Finance Ministry clarified that MDR is neither a tax nor a charge collected by the government or NPCI. It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.

Transactions above Rs 2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 per transaction. The flat charge will provide cost certainty for critical public services and businesses operating on narrow margins.