No More Discounts on Credit Card Payment at Petrol Pumps

New Delhi: Credit card payments to buy fuel at petrol pumps will from October 1 not get a 0.75 per cent discount that state-owned oil companies had introduced more than two and-a-half years back to promote digital payments.

"Dear SBI credit cardholder, as advised by public sector oil marketing companies, the 0.75 per cent cashback on fuel transactions will be discontinued with effect from October 1, 2019," the country's largest bank in a text message informed its credit card customers.

The government had asked Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) to give a 0.75 per cent discount on card payments for fuel purchases after a widespread cash crunch in late 20016 following demonetisation of 86 per cent of currency notes in circulation.

The 0.75 per cent discount of the value of fuel purchases using credit/debit cards and e-wallets was introduced in December 2016 and had continued for more than two-and-a-half years, straining OMCs.

Apart from the cash discounts, the government had also directed OMCs to bear the burden of card payment charges called merchant discount rate (MDR), which is usually paid by the retailer. An industry official said the oil companies have decided to discontinue the discount on all credit card payments from October 1.

However, the discount on debit card and other digital modes of payments would continue, he said.

The three fuel retailers paid Rs 1,165 crore in e-payment discounts and Rs 266 crore to banks for bearing MDR, totalling Rs 1,431 crore in 2017-18. In 2018-19, the outgo almost touched Rs 2,000 crore.

This after the number of digital transactions jumped from 10 per cent in 2016 to over 25 per cent in 2018.

To stem their cash outgo, the oil companies in August last year reduced the discount for all fleet customers using loyalty programmes from 0.75 per cent to 0.25 per cent.

Officials said discounts on debit cards and other modes of digital payments will continue for now. Beginning December 13, 2016, a discount of 0.75 per cent was offered to those using plastic money to buy petrol and diesel. This discount was given by way of cashback, which has been credited to the buyer's account within three days of the transaction.

The 0.75 per cent discount on payments made using either credit/debit cards, e-wallets or mobile wallets translated into a rebate of about 50 paise a litre on petrol and diesel. Petrol currently costs at Rs 74.13 per litre in Delhi, while a litre of diesel costs Rs 67.07.

Exactly a month after the shock demonetisation of old 500 and 1,000 rupee notes, the government had on December 8, 2016, announced a raft of measures, including discounts on online payments for insurance policies, rail tickets and highway toll charges as the government looked to promote digital cash post note ban.

At that time it was stated that 4.5 crore consumers buy petrol and diesel worth Rs 1,800 crore daily and in one-month post-demonetisation, digital payments had doubled to 40 per cent.

"As a part of these initiatives, to promote cashless transactions Government of India has announced to incentivise petrol/diesel customers transacting at PSU petrol pumps by way of 0.75 per cent discount when a customer uses Debit/Credit Cards, Mobile Wallets and Prepaid Loyalty Cards," it was announced then.

In December 2016, a 10 per cent discount on general insurance products purchased online and 8 per cent on life insurance bought online was announced. Railways passengers were encouraged to go cashless with a 0.5 per cent discount on monthly and seasonal tickets for suburban railway networks. The railways was also to give a 5 per cent discount for services like catering and use of waiting rooms, if purchased digitally.

People who paid digitally or used prepaid cards got a 10 per cent discount at toll plazas on highways. Also, a waiver of service tax on the use of credit or debit card for payments up to Rs 2,000 was announced then. A 15 per cent tax was charged on such transactions in December 2016. It wasn't immediately known if all of these discounts have been since withdrawn.

In December 2017, the government announced that it will bear the MDR charges on transactions up to Rs 2,000 made through debit cards, BHIM UPI or Aadhaar-enabled payment systems to promote digital transactions.

The merchant discount rate (MDR) will be borne by the government for two years with effect from January 1, 2018 by reimbursing the same to the banks, it was announced.