In a new twist after the introduction of a Merchant Discount Rates (MDRs) on UPI transactions from October 15 onwards, petrol pump owners have now threatened to accept only cash payments above a certain threshold.
This comes after the new MDR rules stipulate a flat ₹5 charge on merchants when customers pay more than ₹2,000 for certain essential services, such as railways, fuel, and telecom.
Petrol pump owners from various parts of the country have now claimed that the change would squeeze their already-thin dealer margins of ₹2.40-3.40 per litre—a rate determined by state-owned oil marketing companies, as per a Hindustan Times report.
It added that there are 1,03,023 petrol pumps across the country, as of April 2026.
While more than 90 per cent of pumps are operated by three state-run OMCs—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL)—the remainder are owned by private oil firms such as Nayara, Jio-BP, and Shell.
As a result, in a letter to the Centre and state-run OMCs, the Akhila Karnataka Federation of Petroleum Traders (AKFPT) has asked that it be exempted from the essential services bracket of the MDR, claiming that petroleum retail outlets cannot be compared with ordinary retail businesses.
The All India Petroleum Dealers Association also wrote a letter to Union Finance Minister Nirmala Sitharaman on Wednesday, explaining that the MDR move would compound the burden on them, leaving the dealers no room to increase their earnings in proportion to the new value of each transaction above the threshold.
"Such charges could also create an undesirable situation in which dealers are compelled to discourage or restrict UPI payments above a particular threshold," the letter warned.
The association further added that these rates have not been revised since October 2017, despite operational expenses such as electricity, wages, and regulatory compliances rising steadily.
Though talks with OMCs are still underway, these issues remain unresolved, it said, adding that the implementation of the new MDR without even resolving these issues would create a "significant financial burden".
"Even a seemingly modest fixed charge of ₹5 per UPI transaction above ₹2,000 would have a substantial cumulative impact. Petrol pumps process a very large number of transactions every day, and the multiplication of even a small charge across thousands of transactions would create a significant recurring financial burden. A percentage-based MDR of up to 0.4 per cent would be even more disproportionate to the economics of petroleum retailing," the letter added, requesting relief from both percentage-based and per-transaction MDR charges.
