Digital payments get a boost: Oilcos to bear MDR on fuel buying

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The impasse over the payment of merchant discount rate (MDR) charges on fuel purchases via debit cards seems to have reached a conclusion with oil retailing companies – Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp – agreeing to pay the charges,

The move will excuse the buyer, who currently pays the fee, and the fuel dealer from making payment.

MDR, a fee charged by the bank, is currently applicable at 1 percent on credit card and 0.25-1 percent on debit card use via swipe machines.

The government had waived MDR at fuel stations till December 31 to encourage cashless transactions after it kicked off the demonetisation exercise, which had led to a sudden shortage of high-denomination notes.

However, as the temporary waiver ended in January and banks raised demand for reimplementation of MDR, the All India Petroleum Dealers’ Association and Consortium of India Petroleum Dealers declined to pay threatening card transactions will be discontinued.

For oil marketing companies, that plan to bear the charges only up to March 31 as per the Reserve Bank of India directives, the MDR is in addition to a 0.75 percent discount on card and wallet payments on auto fuel purchases.

OMCs do not see the discount period getting extended as demonetisation impact has eased, and are yet to decide whether to approach the government seeking compensation for the revenue losses due to discounts.

OMCs had told Mint in December that the discounts could cause a revenue hit of roughly Rs 1,100 crore till March.

The oil marketing business, including fuel retailing, forms 18 percent of volumes for Indian Oil and 40-50 percent for Bharat Petroleum and Hindustan Petroleum. While diesel forms 70 percent of sales to the commercial segment, petrol is largely sold to retail customers.