Cash is still king at petrol pumps, railway stations

Despite the Centre’s push, digital transactions have only seen a meagre rise; industry players say inconvenience a major reason

Scores of mobile wallets and government initiatives, including digital payment platforms like Unified Payment Interface (UPI) and Bharat Interface for Money (BHIM), have not been able to cut down the use of cash transactions in various segments.

For instance, unreserved railway ticketing and payments at petrol pumps, which together constitute almost 25 per cent of the market for digital transactions, are witnessing the lowest amount of traction.

Experts believe that even two years after demonetisation, lack of specific infrastructure as well as convenience are preventing the use of digital money in these areas.

Soon after demonetisation, the government announced a massive drive for digitisation in consumer-centric fuel sector and railways. However, experts estimate that even after spending close to ~10 billion in advertisements and incentives, the government has not witnessed much growth in these two areas.

According to multiple sources close to the development, digital ticketing transactions by railways just increased from 58 per cent in November 2016 to around 68 per cent till date.

The government was planning to digitise the unreserved ticketing category, which constitutes a major chunk of the railway bookings. However, after running multiple tests and pilots, the government has not managed to zero in on the technology or private players who will handle it.

Mobile wallets, including Paytm and Mobi Kwik, had approached the government with their plans on ways to digitise it but the talks fell flat. “We had a ready plan and approached the government with it. We were planning to use geo-tagging and geo-positioning for over-the-counter buying of tickets. The plan was to ensure that the ticket is bought digitally when one enters the railway station and not after they have boarded a train. All the transactions would have been handled by our wallet and Indian Railway Catering and Tourism Corporation (IRCTC). However, the plan lost steam,” said a senior vice-president at mobile wallet Paytm.

He added that if the plan had gone through, almost 20 per cent of the transactions on their wallet would have been for unreserved ticketing. It was on December 8, 2016, that the sops for digital transactions on various segments, including railways, was announced. Railway Board member (traffic) Girish Pillai had recently said that the overall digital ticketing base of railways is now around 68 per cent. To push digital transactions, the government had levied service charge for tickets booked through the IRCTC website and also lined up 5 per cent discount on payments made online for availing services like e-catering and online booking of retiring rooms. This had wiped out the entire revenue of IRCTC to the tune of ~500 crore per annum.

On the other hand, for oil marketing companies, such payments have only seen a minor growth, though 0.75 per cent discount is being given to consumers on the purchase of fuel at the petrol pumps of oil marketing companies (OMCs). The discount is applicable on debit or credit card payments, mobile wallets and prepaid loyalty cards.

“Our digital transaction base has increased around 2 per cent from 22 per cent to 24 per cent in the last two years,” said S Jeyakrishnan, director marketing of Hindustan Petroleum Corporation (HPCL). Similarly, Indian Oil Corporation’s share has gone up by around 4 per cent from 24 per cent pre-demonetisation to 28 per cent now. IOC director of marketing Gurmeet Singh said the major reason for such low rise is because of the less number of transactions in LPG, where minimal number of consumers are preferring the digital mode, despite ~5 discount on booking a cooking gas cylinder online.

According to many, this is a major blow to the digital drive of the government as OMCs had gone for aggressive campaigns, too, in addition to the discounts.

“In the form of these discounts, companies had suffered thousand of crores of losses. In addition, there were marketing campaigns too. It seems to be yielding no profit as sales in our outlets have come down to the pre-demonetisation levels or even less with more cash in circulation,” said Ajay Bansal of the All-India Petroleum Dealers’ Association.

According to initial estimates, state-run oil marketing companies were expected to take a hit of about ~24 billion annually due to the 0.75 per cent discount. It is estimated that petrol and diesel worth ~18-20 billion is sold to customers on a daily basis in the country.

According to wallet players, it is mostly inconvenience that prevents customers from using mobile wallets, cards and other means of digital transactions at petrol pumps.

“Mobile phones cannot be used at the filling station due to fire safety reasons. The QR code card creates confusion at a place where customer turnaround time is less than five minutes. With debit cards, there are connectivity issues. So, in general, petrol pumps prefer cash,” said a senior associate at Mobi Kwik.