Oil firms to bear MDR fees on card payments at fuel stations
The mess over merchant discount rate (MDR) at fuel stations is close to resolution.
State-owned fuel retailers Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd have agreed to pay MDR, a fee on card usage at swipe machines, for fuel purchased using debit cards. This means neither the fuel buyer— who used to pay this fee—nor the dealer will have to pay it.
Two officials from OMCs who confirmed the development said a notification on the same is likely in a few days. Both spoke on condition of anonymity.
“The implementation process is being worked out now. Earlier, the fuel dealers used to be debited with the MDR and then there was a process of reimbursing them. Now, we are going to directly route MDR through the OMCs to the bank,” said one of the two officials cited earlier.
MDR is a bank fee levied for using debit and credit cards on swipe machines. The fee is 1% on credit card transactions and 0.25-1% on debit card transactions. MDR is levied at the time of purchase, and paid to the bank.
Following demonetisation, the government waived MDR at fuel stations till December 31 to encourage cashless transactions. However, when banks demanded MDR in January, the All India Petroleum Dealers’ Association and Consortium of India Petroleum Dealers refused to pay and threatened to discontinue card transactions. The government stepped in at that time and brought fuel retailers, dealers and banks to the table.
Emails sent to Indian Oil, Bharat Petroleum and Hindustan Petroleum on Friday went unanswered.
For OMCs, the burden of MDR comes on top of a 0.75% discount for purchase of auto fuel using credit and debit cards and e-wallets. The discount came into effect on December 13, 2016.
“MDR would be borne only on debit cards as on credit cards, the customer is already enjoying a 30-40 day credit period and in addition to a 0.75% discount. So, over and above this twin benefit, we thought that people who can afford a credit card would not mind a 0.25% to 1% charge on payments,” said the second of the officials cited earlier.
OMCs said as of now, they plan to bear the charges only up to 31 March, as per directives from the Reserve Bank of India. They have, however, not decided if they would approach the government seeking compensation for the revenue losses incurred due to the discounts offered.