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Amidst the expansion of cashless economy and Digital India across the country, a major and sensitive economic crisis has emerged from the fuel retailing sector. The All India Petroleum Dealers Association (AIPDA) on Wednesday made a formal plea to the Union Finance Ministry, strongly demanding complete exemption from Merchant Discount Rate (MDR) and other banking service charges on UPI (Unified Payments Interface) payments made at petrol pumps. The association, in a detailed and official memorandum sent to the Finance Minister, has made it clear that any additional financial charges proposed or implemented on digital payments are a direct attack on the existence and livelihood of petrol pump operators. National President of the association, Ajay Bansal has appealed to the government to immediately intervene at a high level in this matter so that digital transactions at millions of retail fuel outlets in the country can continue smoothly without any hindrance and common drivers do not have to face any problem in filling fuel.
The Petroleum Dealers Association, in its letter to the Finance Ministry, has detailed the specific and technical economics of petroleum retail business. Association President Ajay Bansal underlined in the letter that the profit of petrol pump dealers is not based on the total bill value of the product sold like a normal grocery store or an e-commerce seller. Under the regulatory guidelines of the Ministry of Petroleum and Natural Gas, the dealers’ margin is fixed at a fixed rate by the government oil marketing companies (OMCs) only based on the volume of sales per liter and not as a percentage of the total transaction value. This simply means that no matter how much the fuel prices increase depending on the international market, or whether the customer buys petrol at Rs 200 or Rs 5000, the pump dealer’s earning remains limited to the fixed amount per liter. There is no legal or commercial way for dealers to increase their commissions or profits in proportion to higher transaction prices.
The memorandum expresses deep dissatisfaction that the basic commission margin of dealers has not been increased by even a single paisa by the oil marketing companies during the last nine years since October 2017. On the contrary, there has been a huge jump in the expenses related to the operation of petrol pumps during this period. The steep increase in commercial electricity rates, continuous increase in the minimum wages of employees and fuel dispensing attendants, renewal of fire safety standards and the cost of complex regulatory compliances have almost eroded the profit margins of dealers. Despite several rounds of bilateral meetings and negotiations with oil companies, this fundamental issue of revision in dealer margins remains unresolved, due to which most of the retail pumps are forced to run only at minimum operating levels.
Detailing the subtle impacts of financial surcharges on digital payments, the association said that for the common consumer, a fixed charge of Rs 5 on transactions above Rs 2,000 or an MDR of up to 0.4 per cent may seem like a nominal amount, but considering the daily turnover of petrol pumps, it would prove to be a devastating financial burden. Petrol pumps are visited by thousands of motorists every day and high value digital sales of millions of liters of fuel are recorded round the clock. If MDR of 0.4 per cent or fixed processing fee per transaction is started being deducted on total digital transactions, then a large part of the nominal commission that dealers get per liter will go directly into the pockets of banks and payment gateway companies, causing dealers to suffer losses from their pockets.
The association argues that whether the customer pays in cash, pays by debit card or does UPI by scanning the QR code from the smartphone, there is no change in the physical quantity of fuel and the nature of its business. Citing the historical context, the letter reminded that after the 2016 demonetization, when there was a controversy over the MDR charged on debit and credit card swipes at petrol pumps to promote digital payments, the Central Government had accepted the narrow margin nature of fuel retailing and completely abolished the MDR charge on card swipes and absorbed the burden on oil companies and banks. The Dealers Association strongly argues that the exact same principles, rules and full exemption scope should be applied to UPI transactions, which has become the largest medium of Digital India.
In the letter written to the Finance Minister, petroleum dealers have also given a very serious and practical warning. The association said that if the government does not immediately intervene and protect petrol pumps from charges on UPI payments, the retail pump operators in the country will be completely forced to refuse to accept UPI payments above a certain financial limit (say Rs 2000) to save their already diminished earnings from sinking. If petrol pumps are banned from accepting UPI payments for filling bulk quantities of fuel in large vehicles, trucks and cars, it will go against the central government’s national vision of digital transactions, financial transparency and ease of doing business. Disputes between customers and pump personnel will increase and long queues will form on national highways and urban centres.
To avert this possible operational crisis and to save the general public from inconvenience, the All India Petroleum Dealers Association has placed two major demands before the Central Government. The first and primary request of the Association is that all UPI payments made at all retail fuel outlets in the country, whether the transaction amount is Rs 50 or Rs 50,000, should be given 100% permanent exemption from MDR and all related interchange and processing charges. Additionally, the association has also made an alternative suggestion that if the government wishes to maintain a common financial limit or threshold in the digital payments ecosystem, then clear and complete safeguards from both percentage-based MDR and per-transaction fixed charges on UPI payments above ₹2,000 may be provided to retail fuel outlets to ensure the continued and uninterrupted operation of petrol pumps so that the digital fuel economy remains on track.