New Delhi, Sept 2026 : Representatives of the All India Petroleum Dealers Association (AIPDA) on Thursday met senior officials of the Ministry of Petroleum and Natural Gas to discuss their demand for exemption from the Merchant Discount Rate (MDR) applicable to certain UPI transactions for fuel purchases at petrol pumps.
According to AIPDA, the meeting focused on concerns that the additional MDR cost could put pressure on dealers’ margins, particularly because retail fuel dealers operate on prescribed commissions.
Under the new UPI framework, transactions above Rs 2,000 for petrol and diesel purchases attract a flat MDR of Rs 5 per transaction. Petroleum dealers said such higher-value transactions account for around 30-40 per cent of total purchases at retail fuel outlets across the country.
The dealers’ association said digital payments have become an important mode of payment at petrol pumps, especially for customers making higher-value purchases. It has therefore sought a complete exemption from MDR for fuel retail transactions, citing the nature of the business and the impact that additional transaction costs could have on dealer margins.
During the meeting, officials of the Petroleum Ministry explained the rationale behind the introduction of the MDR. According to the dealers’ association, the officials said the charge was intended to support the development of the next layer of India’s digital payments infrastructure and the continued expansion of the UPI ecosystem.
“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,” AIPDA said in a statement.
The association indicated that discussions with the government would continue in an effort to find a mutually acceptable solution.
“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 association said.
The issue has gained importance as digital payments have become increasingly prevalent at fuel stations, where transactions above Rs 2,000 are common. Dealers have argued that even a flat transaction charge can affect profitability in a sector where margins are determined through prescribed commissions.
The Finance Ministry has clarified that MDR is neither a tax nor a government levy. It is also not a charge collected by the government or the National Payments Corporation of India (NPCI). Instead, the amount is distributed among participants in the digital payment ecosystem, including banks and payment application providers, to support the operation and expansion of UPI services.
The new framework applies the Rs 5 flat MDR to transactions above Rs 2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs.
The government has maintained that the flat charge provides greater cost certainty for businesses and critical public services operating on narrow margins, while supporting the infrastructure required for the continued growth of digital payments in India.
AIPDA is expected to continue discussions with the authorities on its demand for a fuel-sector exemption.
