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Public sector oil marketing companies (OMC) are negotiating with banks for lowering the existing merchant discount rate (MDR) levy on credit/debit card transactions.
According to officials aware of the discussions, OMCs are citing higher volumes and value of transactions to convince banks to opt for a lower MDR slab. The merchant discount rate is an interchange fee paid to the bank that issues the credit or debit cards.
According to the All India Petroleum Dealers’ Association (AIPDA), banks charged one per cent on credit card transactions and between 0.25 per cent and one per cent on debit cards at fuel outlets.
According to government officials, PSU OMCs will bear the entire burden of MDR to encourage cashless transactions after retailers protested against the levy. While the government cannot mandate private OMCs to follow course, it is expected that they will follow suit to protect market share.
IGL to bear costs
Like its peers in the fuel retailing business, Indraprastha Gas Ltd (IGL) has decided to bear the MDR levy and not to pass it on to consumers.
IGL Managing Director ES Ranganathan told BusinessLine , “At Rs. 55 lakh a day, card transactions constitute 34 per cent of IGL’s sales. If this goes up to 50 per cent of IGL’s daily transactions, the 0.75 per cent MDR levy will be charged on around Rs. 90 lakh daily. Effectively, the hit will be around Rs. 90,000 to Rs. 1 lakh a day, which will amount to Rs. 3.5 crore annually.”
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