Fuel station owners throughout India have voiced objections to proposed fees on digital payment transactions. A revised Merchant Discount Rate framework, announced by the National Payments Corporation of India, is scheduled to come into force on 15 October 2026.

Retail transactions exceeding Rs 2,000 are subject to processing charges under this structure. Ordinary retail businesses are subject to a 0.4% levy, whereas fuel stations are subject to a reduced fixed-rate charge. A flat fee of Rs 5 per transaction will apply to any fuel purchase exceeding Rs 2,000. Transactions under Rs 2,000 attract no processing charges regardless of the merchant category involved.

Fuel retailers contend that the Rs 5 price ceiling places their day-to-day operations under financial strain. Dealer associations have indicated they may impose a cap on UPI transactions at petrol pumps. Shop owners across states such as Madhya Pradesh have stated they will stop accepting UPI transactions exceeding Rs 2,000 unless exemptions are put in place.

A written petition was submitted by the All India Petroleum Dealers Association (AIPDA) to Union Finance Minister Nirmala Sitharaman. Bansal, who heads the association, noted that petrol pump dealers earn a fixed commission per litre, with rates determined by government-owned oil firms. Those profit margins have held steady since October 2017.

Fixed overhead costs reduce net margins when revenue fails to keep pace with higher fuel expenditure. Running costs, including employee pay, energy bills, and the cost of meeting regulatory requirements, have risen notably. Because payment operators process high volumes of transactions daily, a flat Rs 5 charge per transaction can accumulate to a considerable sum across a monthly billing cycle.

According to sector data, fuel retail outlets across India process approximately 24 million UPI payments each day. Approximately one in five of those payments falls above the Rs 2,000 limit. Each pump is projected to incur a daily shortfall of between Rs 230 and Rs 250. Across more than 100,000 retail points nationally, the industry is estimated to be absorbing financial losses amounting to crores each day.

The Confederation of All India Traders (CAIT) pointed out that restricting cashless payment options at petrol stations adds inconvenience for customers. Daily travellers and goods vehicle drivers typically spend more than Rs 2,000 on fuel at a time. Existing rules bar retailers from transferring transaction fee costs onto buyers. Financial institutions were directed to enforce adherence to pricing rules and impose penalties on vendors applying additional charges.

Retailers have indicated that the mandatory fee structure places them in a position where they may either absorb the additional costs or limit acceptance of high-value digital transactions. The AIPDA contends that the distinct financial structure of fuel retailing had previously been acknowledged by the government. Exemptions for card payment processing at petrol stations had long been permitted under existing rules. Traders have called for equivalent policy waivers to be applied to high-value UPI transactions.

Peer-to-peer transfers and low-value vendor transactions carry no fees for everyday users. Roughly 95 out of every 100 retail payments recorded nationwide carry a value below the Rs 2,000 mark. Motorists who top up their tanks in full — from everyday vehicle owners to those operating commercial fleets — could find themselves affected if petrol stations introduce limits on UPI-based payments for fuel. Purchasers whose merchants opt out of digital payments above Rs 2,000 are required to settle transactions through cash, debit cards, or divided payment methods.

The finance ministry argues that applying modest MDR fees would cover the costs of maintaining payment infrastructure. The UPI network spends roughly Rs 20,000 crore each year on infrastructure upkeep, fraud detection, and digital security operations.

Fuel retailers are engaged in ongoing talks with Oil Marketing Companies as the deadline draws near. Petrol dealers have urged state-owned oil companies to absorb the Rs 5 charge if the federal government opts against providing a complete waiver. Fuel stations would maintain digital payment acceptance provided that financial assistance is extended by OMCs or the relevant ministry. A cap on UPI transactions at fuel stations across the country may come into effect from 15 October should talks break down before that date.