UPI Charge From October 15: Petrol Pump Dealers Demand Complete Exemption

Petrol pump dealers have sought complete exemption from the new UPI Merchant Discount Rate (MDR), arguing that the Rs 5 charge on certain merchant transactions above Rs 2,000 could put additional pressure on their fixed margins.

The United Petroleum Dealers Association (UPDA) wrote to the Central Government and relevant institutions on September 16, seeking to keep petrol pumps entirely outside the UPI MDR framework. The new NPCI framework will come into effect from October 15, 2026.

Under the arrangement, certain merchant UPI payments above Rs 2,000 will attract an MDR of Rs 5 per transaction. Fuel, including petrol pumps, is also covered. The charge will not be collected from customers. For instance, if a customer makes a Rs 2,500 UPI payment at a petrol pump, the customer will not have to pay an additional Rs 5.

The charge will instead apply on the merchant side of the digital payment system. UPDA said petrol and diesel prices cannot be fixed arbitrarily at the dealer level. The selling price of fuel and dealer commission are determined under an established system.

As a result, dealers cannot recover the Rs 5 charge on UPI payments above Rs 2,000 by adding it to the customer's bill. The dealers' association has argued that the additional cost could therefore come directly out of their fixed margins.

UPDA said a large number of transactions at petrol pumps are above Rs 2,000. It argued that the Rs 5 MDR could consequently become a significant expense when applied across a large volume of daily transactions. For example, if a petrol pump handles 200 UPI transactions above Rs 2,000 in a day, the MDR would amount to Rs 1,000 per day at Rs 5 per transaction.

UPDA has also said that shifting the cost of the new charge to government-owned oil companies — IOCL, BPCL and HPCL — would not provide a solution. In its letter, the association cited past experiences involving delays and deductions in the settlement of sales proceeds.

It also raised concerns over expenses related to the rental and maintenance of POS/EDC machines. UPDA has made four key demands to the government and relevant institutions. The association has sought a complete exemption for petrol pumps from UPI MDR and requested that petrol pumps be treated as a special merchant category.

It has also asked for clear directions to banks, PSPs, acquirers and NPCI to ensure that dealers are not charged any MDR-equivalent fee. Finally, UPDA has demanded that the cost of digital payments should not be passed on to petrol pump dealers in any form.

The demands have been raised by UPDA, while the Finance Ministry, Petroleum Ministry, NPCI and oil companies have not yet responded to the letter. With the new UPI framework scheduled to take effect from October 15, the issue of MDR has opened a fresh debate between petrol pump dealers and the government.

A new NPCI framework will introduce a Rs 5 charge on merchant UPI payments exceeding Rs 2,000. This MDR is scheduled to take effect from October 15, 2026.