Petroleum dealers oppose MDR on fuel, seek exemption

Petroleum dealers have voiced concern over the Merchant Discount Rate framework, particularly the flat ₹5 MDR on fuel transactions above ₹2,000 that they need to pay beginning October 15.

A large proportion of fuel sales are high value transactions that routinely exceed ₹2,000. Any additional charge would erode the dealer margin, United Petroleum Dealers Association general secretary M.Amarender Reddy said on Wednesday.

Appealing to the government for exemption of all petroleum retail outlets from any MDR, irrespective of the transaction value, he said “protecting the thin regulated margins of dealers is necessary both for viability of the retail network and for continued high adoption of UPI at fuel stations”.

Even a flat ₹5 charge per transaction, above ₹2,000, will have a severe cumulative impact on the dealers as their margins are fixed per litre basis. With pump prices of petrol and diesel determined and controlled under the framework of the State-owned oil marketing companies (OMCs) and government policy, the dealers have little freedom to revise the selling price or independently adjust margins to cover any additional cost arising from a particular payment mode, he said.

K. Suresh Kumar, general secretary of the Consortium of Indian Petroleum Dealers, estimated the additional expenditure for high volume city and highway dealers, because of the MDR charge, to be ₹40,000-50,000 per month. “We may have to stop accepting UPI payments if the government proceeds as planned,” he said, adding OMCs are in discussions with the authorities.

In a letter addressed to Union Finance Minister, Petroleum Minister, RBI Governor, the National Payments Corporation of India and OMCs, Mr.Reddy said fuel dealers had wholeheartedly supported digital payments at retail outlets of the part of the national digital payment initiatives.

“Penalising them for accepting the very infrastructure that has been encouraged is inequitable and contrary to objective of a cashless economy,” he said, demanding recognition of fuel outlets as a special category of merchants in view of the regulated pricing of petroleum products and the fixed dealer commission.

The United Petroleum Dealers Association also opposed shifting the MDR burden to the OMCs, citing past experience when the arrangements involving the oil companies and their fintech/payment partners frequently resulted in delayed settlement of sale proceeds and other issues. “Such practices have already short changed dealers,” he said.