New Delhi, September 17, 2026: The All India Petroleum Dealers Association (AIPDA) has sought a complete exemption for petrol pumps from Merchant Discount Rate (MDR) and other transaction charges on UPI payments, particularly for transactions above ₹2,000.
AIPDA President Ajay Bansal wrote to Union Finance Minister Nirmala Sitharaman on September 16, urging the Centre to exempt petroleum retail outlets from UPI-related payment charges irrespective of transaction value.
The representation comes ahead of the new UPI MDR framework scheduled to take effect from October 15, 2026. Under the framework, eligible person-to-merchant UPI transactions above ₹2,000 will generally attract an MDR of 0.4%, capped at ₹300. However, transactions in specified sectors, including fuel, will attract a flat ₹5 MDR when the transaction exceeds ₹2,000.
Why petrol dealers are seeking exemption
In its letter, AIPDA argued that the economics of petroleum retailing are different from ordinary retail businesses. According to the association, dealers primarily receive margins fixed on a per-litre basis, rather than margins linked to the value of an individual transaction.
The association said dealer margins have remained substantially unchanged since October 2017, while operating expenses, including wages, electricity and regulatory compliance costs, have increased.
AIPDA said that because dealers cannot increase their earnings proportionately when the value of a fuel transaction rises, an additional payment-processing charge would directly reduce their existing margins.
The association further argued that even the proposed ₹5 charge per eligible UPI transaction could have a significant cumulative impact because petrol pumps process a large number of transactions every day.
Dealers warn against discouraging UPI payments
AIPDA also raised concerns that additional charges could lead some petrol pump operators to discourage or restrict UPI payments above a certain threshold in order to protect their margins.
According to the association, such a situation could run contrary to the broader objective of promoting digital payments, transparency and convenience.
The dealers also referred to earlier relief provided in relation to MDR on card-based fuel transactions and argued that a similar approach should apply to UPI payments for petrol and diesel.
What AIPDA has requested
The association has made two principal requests to the Finance Ministry:
Complete exemption of petroleum retail outlets from MDR and any other transaction charges on UPI payments, irrespective of transaction value.
If the ₹2,000 threshold continues to apply to UPI transactions generally, petrol pumps should be exempted from both percentage-based MDR and fixed per-transaction charges on payments above ₹2,000.
The association said such an exemption would recognise the high transaction volumes, essential nature of fuel retailing and the fixed-margin structure under which petroleum dealers operate.
Customers will not be charged MDR
The issue concerns a merchant-side payment charge and not a ₹5 tax or fee on customers. The government and NPCI have said customers will continue to make UPI payments without MDR, while the applicable MDR is charged within the merchant-payment ecosystem.
The new framework is scheduled to come into effect on October 15, 2026, meaning AIPDA’s request comes before the revised charges are implemented.
