A sudden move by banks to levy a 1% transaction fee on card payments at petrol pumps has taken the oil ministry by surprise and prompted dealers to say they will stop accepting plastic money from midnight, which could cause inconvenience to consumers in times of cash shortage and affect the government’s move to encourage cashless transactions.
In Delhi, ministry officials said they were unaware of the move by the banks and have asked them to put off the levy till a system of compensating the petrol pump dealers is disccused by all stakeholders- state-run fuel retailers, banks and petrol pump owners. The banks’ move will not target the citizens directly as no new charges will be levied on customers using cards.
Stopping card payments and accepting only cash at petrol stations comes at a time when the Centre is pushing for increased non-cash transactions and announced a 0.75% cashback offer on purchase of petrol using plastic money.
Dealers said ICICI Bank, HDFC Bank and Axis Bank communicated to them on Saturday night and informed them about the surcharge. ICICI bank, however, has denied sending any such communication to any dealers. “We will not charge any transaction fee on card payments from tomorrow,” ICICI Bank spokesperson told TOI.
ICICI Bank and HDFC Bank account for some 60% of card swipe machines deployed at 52,000 petrol pumps out of the 53,842 public sector fuel retail outlets across the country. There are 56,190 petrol pumps in the country, including those run by private oil companies.
Following the notice, pump owners took the decision to stop accepting card payments at a meeting of all petrol pump dealers’ associations in Bengaluru on Sunday. All India Petroleum Dealers Association (AIPDA) president Ajay Bansal told TOI from Bengaluru that all pump owners are firm in their decision to withdraw card swipe machines from intervening midnight of Sunday and Monday.
“They (banks) must apologise to the public,” B R Ravindranath, president, Akhila Karnataka Federation of Petroleum Traders and Bangalore Petroleum Dealers Association, told TOI in Bengaluru.
Dealers say the transaction fee by banks will wipe out their profit, which is set by the state-run fuel retailers. Ravindranath claimed the net profit, after deducting all operational costs, stands at at 0.3% to 0.5%. “If the banks straight away levy a 1% transaction fee, where do they expect us to go. It becomes extremely difficult to survive in such circumstances,” Ravindranath said.
In a communication to finance minister Arun Jaitley, AIPDA said: “To compound matters further, these credit card machine issuers are delaying settlements and not settling the entire dues as per our settlements. There are disputes about purchases being returned or not delivered. The reconciliation of swipes to amount being credited to our accounts is causing a lot of hardships and losses to a large percentage of the dealer community.”
According to Bansal, banks usually have agreement with establishments that have a profit margin of 5% or more. “Petrol pumps are the only sector where the banks bear the cost of even our communication lines used for the card swipe machines. So if they levy the fee, we cannot pass on the burden to consumers as the sale prices are set by oil companies, as also our margin. So that leaves burden sitting on our laps. We don’t have the strength to bear the burden and will collapse unless it is withdrawn or oil companies lend us their shoulders,” he said.
Assuring quick resolution of the issue, ministry officials in Delhi said “to be fair to dealers,” the transaction fee cannot be paid by consumers or dealers. “It should be borne by the oil marketing companies. But that would need 2-3 days discussion to evolve a system that would allow dealers to raise demand daily and banks to compensate them. We are asking banks to put off the levy till detailed discussion on this is done,” a top ministry official told TOI.
The dealers are aware of the damage that can be caused to their public image due to their protest but claim they have no other choice. “The public will see us as the villains now. They will think we are inconveniencing them by demanding only cash, but the truth is not that. Sale of petrol/diesel is highly regulated and we cannot fix our own rates in view of this sudden levy by banks. So our best option is to not accept cards,” the manager at a Bengaluru petrol pump said.