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9 Jan 2017

Petrol row reveals card wart - Crisis averted after late-night brake on fee

Sambit Saha, TT, Jan. 8: Lack of clarity on who will bear the cost of the cashless drive pushed the country tonight to the brink of a fuel crisis, forcing the Centre to scramble to defer a fee that threatened to freeze payments by cards at petrol pumps.
Informed by banks last night of a fee on card transactions, petrol pump dealers in several parts of the country threatened not to accept such payments from Monday.
Late tonight, a temporary truce was achieved with petroleum minister Dharmendra Pradhan saying that banks had agreed to defer the fee till January 13. The apex body of petrol dealers said cards would be accepted till Friday.
"We have received official communication from the oil marketing companies that with the intervention of the petroleum minister, the transaction fee has been deferred till January 13. We have also decided to defer the agitation till January 13," Ajay Bansal, the president of the All India Petroleum Dealers' Association, said well past 11pm.
Had the late-night breather not been found, chaos might have unfolded on roads across the country from Monday. Before demonetisation, any refusal to accept cards would not have had any widespread impact. However, with restrictions on cash withdrawals still in place, payments through card have become a lifeline.
Dealers said several banks had conveyed to them that a fee ranging between 0.25 per cent and 1 per cent would be levied on purchases made on their point-of-sale (PoS) machine from Monday. The fee is known in banking parlance as MDR (merchant discount rate). "Our margins are fixed on a per kilolitre basis and we do not have any scope to absorb this charge," Bansal had said in the afternoon.
The oil ministry intervened in the evening. Soon, some banks said they would not insist on the fee while others said they would. The dealers then insisted on an official assurance.
Before the demonetisation drive, customers used to be charged a 2.5 per cent surcharge if they used cards other than premium or co-branded cards. On December 8, the government had asked public sector units not to pass on the fee to the customers but to absorb it themselves.
On December 16, the RBI issued a notification asking banks to limit MDR to 0.25 per cent up to transactions of Rs 1,000, 0.5 per cent between Rs 1,000 and Rs 2,000 between January 1 and March 31.
Citing this notification, banks have activated the fee. The government's stand suggests oil companies should pick up the tab but there is no clarity on this front.

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