Tezzbuzz Desk- The new rule regarding UPI payment of more than ₹ 2000 at petrol pumps is in discussion. Merchant Discount Rate i.e. MDR will be applicable on such select merchant transactions from October 15, 2026. For the fuel sector, flat ₹5 MDR has been fixed on UPI payments above ₹2000. This fee will not be charged to the customer, but will be applied to the merchant payment system.
Under the new UPI framework, MDR will not be levied on merchant UPI payments up to ₹2000. At the same time, 0.4 percent MDR will be applicable on general merchant transactions above ₹ 2000, the maximum limit of which has been kept at ₹ 300 per transaction. However, for fuel, railways, telecom, insurance and some other specified sectors, a flat ₹5 MDR has been fixed on payments above ₹2000.
The most important aspect of this is that the customer making UPI payment of ₹ 3000 at the petrol pump will not be charged additional ₹ 5. According to the Finance Ministry, MDR will not be imposed on the customer. This means that the fuel payment of ₹ 3000 for the customer will remain ₹ 3000 only, while the fixed fee will be applicable in the merchant payment system.
Petrol pump dealers are expressing concern about this fee. All India Petroleum Dealers Association has written a letter to the Finance Minister demanding complete exemption of petrol pumps from UPI MDR. The association says that the margins of fuel retailers are fixed and their earnings do not increase proportionately as the transaction amount increases. In such a situation, a charge of ₹ 5 on every large UPI transaction may become an additional cost for them.
The concern of dealers can be understood with an example. Suppose a customer filled petrol worth ₹ 3000 at a petrol pump and paid through UPI. Additional ₹5 will not be charged from the customer on this transaction. The MDR applicable for petrol pumps will be ₹5. If 40 such transactions take place in a day at a station, this alone results in a cost of ₹200 in MDR. If there are more number of large UPI transactions, this expense will also increase accordingly.
Dealers say that their margin on fuel sales is fixed on per liter basis. Therefore, changing the method of payment does not increase the margin from sales. On this basis, Petroleum Dealers Association has demanded exemption from MDR on all UPI payments.
Regarding this issue, petrol pump dealers of some states have said that they will not accept UPI payments of more than ₹ 2000. The Dealers Association in Punjab has announced a ban on UPI payments of more than ₹2000 from September 21, 2026. Dealers in Maharashtra have also demanded the government to keep fuel transactions completely out of MDR.
However, the new rule is not applicable to all UPI payments. Person to person i.e. P2P UPI transactions will remain free as before. According to the government, about 96 percent of merchant UPI transactions will also not be affected by this change. Therefore, UPI charge above ₹2000 will be applicable mainly on payments falling under prescribed merchant categories and applicable rules.