Petrol pump dealers across several states have threatened to stop accepting UPI payments of ₹2,000 and above if they are required to bear the new ₹5 Merchant Discount Rate (MDR) on fuel transactions.
The warning comes ahead of the new UPI MDR framework, which is scheduled to take effect from October 15, 2026. Under the framework, fuel payments above ₹2,000 will attract a flat ₹5 MDR, while payments below ₹2,000 will continue to have zero MDR.
Dealers Say Margins Are Already Very Thin
Petrol pump operators argue that even a ₹5 charge can have a significant impact because their margins are relatively small.
Dealers in Delhi-NCR, Punjab, Uttar Pradesh, Maharashtra, Karnataka and Rajasthan have raised concerns about the additional cost. They estimate their margins at around ₹2.40 to ₹3.40 per litre, with dealer commissions determined within the regulated oil marketing framework.
The All India Petroleum Dealers Association has also sought government intervention and asked for a complete exemption from MDR on fuel payments above ₹2,000.
What the New UPI Rule Says
Under the new framework, the standard MDR for eligible UPI merchant payments above ₹2,000 is 0.4%, subject to a ₹300 maximum for transactions of ₹75,000 and above.
However, certain categories have been given a concessional flat rate. Fuel, railways, telecom services, insurance and specified utility payments will attract a ₹5 MDR on transactions above ₹2,000 instead of the standard percentage-based charge.
The important point for consumers is that the ₹5 charge is imposed on the merchant, not the customer. The rules do not allow merchants or payment providers to pass the MDR directly on to consumers.
Dealers May Switch to Cash
Despite the consumer protection, petrol pump operators say they may have little choice but to restrict digital payments if the MDR remains in place.
Monty Sehgal, spokesperson for the Federation of All India Petroleum Traders, said fuel retailers could be forced to restrict UPI payments above ₹2,000 unless an exemption is granted.
If implemented widely, customers making larger fuel purchases could therefore be asked to pay by cash or another payment method, rather than UPI.
UPI Fee Debate Intensifies
The petrol dealers’ protest comes as other businesses, including retailers and financial intermediaries, have also raised concerns about the new MDR framework.
The government has defended the change as a way to create a sustainable financial model for UPI and fund areas such as payment infrastructure, cybersecurity and customer services. Consumers will continue to use UPI without a direct transaction fee.
Summary
Petrol pump dealers across several states have threatened to stop accepting UPI payments above ₹2,000 if they must pay the new ₹5 MDR. Dealers say the charge could further squeeze their thin margins. The new framework begins October 15, while the government has said the MDR cannot be passed directly to customers.
