OMCs may absorb extra charge for digital transactions at fuel outlets

Oil Minister Dharmendra Pradhan said consumers and outlets will not be burdened with MDR charges

The burden of transaction charges for the fuel bought through cards at petrol pumps is likely to be absorbed by the state-run oil marketing companies like Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd .  

According to sources close to the development, in a meeting called by the Department of Financial Services of the Ministry of Finance, which was attended by oil marketing companies, banks and retail outlets, it was broadly agreed that OMCs may bear the discount that has been given on card transactions and may also absorb 1 per cent charge levied by banks for every sale on credit and debit cards.

After the meeting, petroleum minister Dharmendra Pradhan told the media that consumers and retail outlets will not be burdened with Merchant Discount Rate (MDR), while banks and OMCs are set to share it.  Pradhan stated that both banks and oil marketing companies will work out an arrangement, which will help consumers to continue to use debit cards at fuel retail outlets. However, an official close to the development told Business Standard said, in terms of anonymity, "Though the modality is not yet worked out, only OMCs are likely to absorb the burden. This was more or less decided in the meeting." About 30,000, of the total 56,190 fuel retail outlets in the country, is currently using point of sale machines. Out of this, 52,604 fuel stations are owned by public sector and the rest by private sector. MDR is a charge levied by banks for accepting card payments. after demonetisation, this charge was waived off till December 31.

The issue came to limelight after two retailers' associations — All India Petroleum Dealers Association and Consortium of India Petroleum Dealers (CIPD) — decided not to accept card payments after four banks, including HDFC Bank, Axis Bank, ICICI Bank and Punjab National Bank decided to charged 1 per cent on all credit card transactions and between 0.25 per cent to 1 per cent on all debit card transactions from 9th January 2017.  

The organisations went back on the decision and post-poned the move till January 13, after intervention by the petroleum ministry and assurance by Pradhan that neither the customers nor dealers will bear additional charges on digital transactions at fuel outlets. "We trust the assurance of the minister and will accept card transactions even after January 13," said A D Sathyanarayan, President of Consortium of India Petroleum Dealers (CIPD).  On December 13 last year, the government had also announced 0.75 per cent discount on purchase of fuel through card.

When contacted, Rajiv Anand, Executive Director — Retail Banking of Axis Bank, said, "We are working with the oil marketing companies to implement an arrangement which will allow consumers to continue to use debit cards at fuel retail outlets. We remain committed to ensure that the momentum built for digital transactions be carried forward and that customers are not inconvenienced.”