Why Fuel Dealers Are Pushing for UPI Transaction Fee Exemption

In a recent meeting with the Ministry of Petroleum and Natural Gas, the All India Petroleum Dealers Association (AIPDA) raised concerns over the merchant discount rate (MDR) imposed on UPI transactions for fuel sales. They argue that these fees could significantly impact their profit margins, especially for high-value purchases. The association is seeking a complete exemption from these charges, emphasizing the importance of digital payments in their operations. The Finance Ministry clarified that the MDR is not a government tax but a fee shared among payment ecosystem participants. This article explores the implications of these fees on fuel dealers and the ongoing discussions with the government.

By Narendra Chaudhary Sep 17, 2026, 16:19 IST

Fuel Dealers Seek Relief from UPI Transaction Fees

New Delhi: On Thursday, representatives from the All India Petroleum Dealers Association (AIPDA) engaged with senior officials from the Ministry of Petroleum and Natural Gas to address their request for an exemption from the merchant discount rate (MDR) applied to UPI transactions for fuel sales at petrol stations.

The dealers expressed concerns that the additional MDR costs could adversely affect their profit margins, particularly since retail fuel sales operate on fixed commission structures.

Under the new UPI guidelines, a fee of Rs 5 is charged for transactions exceeding Rs 2,000 for petrol and diesel purchases. Dealers noted that such transactions represent approximately 30-40% of total sales at retail outlets nationwide.

Officials from the Petroleum Ministry explained that the introduction of the MDR is essential for enhancing India's UPI digital infrastructure.

The AIPDA highlighted that petroleum dealers have been proactive in adopting digital payment methods and have collaborated with the government to promote these practices across the country.

The association aims to maintain ongoing discussions with the government.

They stated, "We are eager to continue our dialogue to find a solution that benefits consumers, petroleum dealers, and all participants in India's UPI ecosystem."

Dealers have voiced their worries as digital payments have become increasingly vital for transactions at petrol pumps, especially for larger purchases.

They are advocating for a complete exemption from MDR for fuel retail transactions, citing the unique nature of their business and the financial strain that MDR costs impose on their margins.

The Finance Ministry clarified that the MDR is not a tax or fee collected by the government or the National Payments Corporation of India (NPCI). Instead, it is shared among various participants in the payment ecosystem, including banks and payment app providers, to facilitate the operation and growth of the UPI system.

For transactions exceeding Rs 2,000 in essential sectors with thin profit margins—such as railways, telecommunications, insurance, fuel, and agricultural inputs—a flat MDR of Rs 5 will apply. This fixed charge aims to provide cost predictability for essential public services and businesses operating on tight margins.