BackOil firms and banks agree to split card payment charges at petrol pumps
Union oil minister Dharmendra Pradhan says government is yet to decide on the sharing parameters for card transaction charges between oil marketing companies and banks
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New Delhi: Oil minister Dharmendra Pradhan said on Thursday that banks and oil marketing companies such as Indian Oil Corp. will bear the cost of using credit and debit cards at petrol pumps, sparing consumers and fuel dealers.
The cost is the so-called merchant discount rate, or MDR, which is charged every time a card is used and split between the company that has installed the card machine, the network provider such as Visa or MasterCard, and the issuing bank. On average it is around 1% of the transaction value.
After 8 November, to make things easier for customers and to promote non-cash transactions, the government announced a 0.75% discount on card purchases of fuel. It also waived the MDR on such purchases for 50 days. With that promotional period lapsing, banks said they would reinstate the charge.
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The banks said they would recover the charge from dealers from 9 January, prompting dealers to threaten not to use card-swiping machines issued by some banks. That stalemate called for government intervention.
“The decision is very clear. Consumers will not be burdened with card use charges. Retail outlets will also be kept out of its purview. It is between banks and oil marketing companies how they share it," Pradhan told reporters after a meeting with bankers and oil firms.
The minister later tweeted that the decision to spare consumers and dealers was unanimous.
The minister also tweeted that a proper mechanism would be put in place by 16 January by banks and oil firms.
“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 is carried forward and that customers are not inconvenienced," Axis Bank said in a statement quoting executive director-retail banking, Rajiv Anand. Fuel dealers have a thin margin on retail operations fixed by oil companies.
Customers will still have to pay a 2.5% surcharge on fuel purchases, although several card issuers and banks have waived this.
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