Fuel Pumps Say No To Cashless Transaction, Later Agree Till Jan 13

Consumers were left in a state of worry since this decision comes at a time of cash shortage, and against the government's initiative to encourage cashless transactions.

Finally, there was relief on the same day after banks agreed to defer their decision to charge petrol pumps 1 percent transaction fees. The move has convinced petrol pump owners to continue accepting cards for payments till January 13.

A senior official from the Oil Ministry said, "Banks have agreed to defer the fee for 4-5 days", hinting that mechanism to compensate dealers will be worked out.

One of the pointers of this issue is the Merchant Discount Rate (MDR), the bank passes on the money to the petrol pump owner after deducting fees in the form of merchant discount rate. The agreement between the bank and the merchant has a clause that does not allow the merchant to pass on the charge.

Fuel station owners have argued that the margin from selling fuel is very minimal to absorb such charges, so there has been a tacit agreement between banks and petrol pumps, where banks charge a lower MDR of 1 percent and the petrol pumps pass on the MDR to the customer, calling it a ‘Surcharge'.

After demonetisation, the government said that the surcharge will not be passed on to customers by petrol stations, and pumps will be given a discount. The government had also asked banks to waive off debit card charges to merchants till December 31.

Post December 31, banks said that MDR could not be zero, which will make the electronic payment method a loss making business for card issuers and Point Of Sale (POS) installers.

Petroleum dealers have said that banks such as SBI, HDFC, and Axis have communicated to fuel station owners about surcharges, and hence petrol stations stopped accepting cards. India's largest private bank, ICICI however, said no such communication was made.