UPI MDR: PCI fact-checks Kerala Congress' ₹146 claim on ₹30,924 diesel payment (Images: Representational, @X/INCKerala)
he Payments Council of India (PCI) on Thursday disputed a claim by the Kerala Congress that a 0.4% UPI Merchant Discount Rate (MDR) on fuel payments could significantly cut petrol pump operators' margins and push up transportation costs, saying the calculation does not apply to fuel transactions.
Kerala Congress claimed that a truck filling 300 litres of diesel would require a payment of ₹30,924 and that a 0.4% MDR would cost the pump owner about ₹146. It said this would reduce the operator's gross commission by 18.66%.
The party said, "Will he absorb the hit, or pass it to the customer, or ask for cash. Why would the trucker pay extra when cash costs nothing?"
hat is the Merchant Discount Rate (MDR) for UPI fuel transactions above ₹2,000?⌵
2Why did the Kerala Congress make claims regarding UPI MDR and fuel payments?⌵
3How does the new UPI MDR policy affect small merchants with monthly collections up to ₹1 lakh?⌵
4Should consumers expect an increase in cash transactions due to the new 0.4% MDR on UPI payments?⌵
5What measures is the Finance Ministry taking to prevent merchants from passing MDR charges to customers?⌵
It further mentioned that higher costs could eventually affect customers of trucking companies, particularly businesses operating on thin margins.
PCI says fuel MDR is capped at ₹5
Responding to the claim, PCI said the ₹146 calculation was based on an incorrect application of the MDR rate to fuel transactions.
With due respect, we wish to put forward a factual clarification: The ₹146 figure does not reflect the fuel-specific MDR provision," PCI stated.
Citing the NPCI FAQ, PCI said fuel and petroleum transactions above ₹2,000 attract a flat MDR of ₹5, while transactions below ₹2,000 have zero MDR.
Under this provision, PCI said the MDR on a ₹30,924 fuel purchase would be ₹5, or ₹5.90 including 18% GST if GST is applicable, rather than ₹146.
What does NPCI's FAQ say?
The clarification refers to Q33 of the NPCI FAQ, which asks which merchant categories qualify for a flat MDR instead of a percentage-based rate.
The answer lists categories including railways, telecom services, insurance and fuel, among others, and states that a flat MDR of ₹5 per transaction applies to transactions above ₹2,000.
This means the fuel transaction cited by Kerala Congress would not attract a 0.4% MDR calculated on the entire ₹30,924 payment under the provision cited by PCI.
PCI concluded its response by saying, "We hope this clarification is helpful in keeping the discussion factually accurate and constructive."
The issue centred on the distinction between a percentage-based MDR and the sector-specific flat MDR applicable to fuel transactions, with PCI saying the latter should be used when calculating the cost of the diesel payment described by Kerala Congress.
Cash transactions unlikely to rise after 0.4% levy on payments above ₹2,000: Report
The Finance Ministry does not anticipate a significant shift towards cash payments after a 0.4% MDR is introduced on UPI transactions above ₹2,000 from October 15, according to PTI citing sources.
Officials expect the new charge to have limited impact on UPI usage, as transactions above the ₹2,000 threshold account for only around 4% of the total UPI transaction volume, the sources said.
Concerns over consumers switching to cash are also unlikely to materialise, according to its sources, as RuPay debit card transactions will remain completely free, regardless of the transaction amount.
Govt reportedly plans checks to protect consumers
The Finance Ministry is working on a monitoring framework to ensure that payment service providers do not transfer the MDR cost to customers, reported PTI citing sources. The ministry has already begun discussions with payment aggregators and other participants in the UPI ecosystem to make them aware of the new MDR and discourage any attempt to pass the charge on to users.
The government also does not expect the new levy to significantly push up prices of goods and services. They mentioned the measure is unlikely to create an inflationary impact.
GST impact expected to remain limited, says report
Sources said GST charged on MDR is expected to be largely neutralised through input tax credit, limiting its effect on the overall cost of transactions.
The ministry has categorised various types of transactions under specialised categories and does not expect GST on MDR to create a significant additional burden, the sources said.
However, should any unresolved questions concerning GST on MDR arise, they may be placed before the GST Council for consideration at its upcoming meeting, they added.
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