LPG Distributors Flag New ₹5 Digital Payment Fee, Plan to Seek Government Exemption

Cooking gas distributors are assessing how a proposed flat ₹5 Merchant Discount Rate (MDR) on digital transactions above ₹2,000 will affect their business, and intend to approach the government for relief before the levy takes effect on October 15.

The charge has been proposed by the National Payments Corporation of India (NPCI), which runs the country's retail digital payment systems. Under the framework announced by NPCI, a fixed MDR of ₹5 per transaction will apply to transactions above ₹2,000 in specified merchant categories, including railways, telecom services, insurance and fuel.

MDR is the fee a merchant pays to a bank or payment service provider for accepting a digital payment. It is normally a small percentage of the transaction value, deducted before the merchant receives the money.

Commercial cylinders clearly covered

For LPG distributors, there is little ambiguity about commercial sales. A 19-kg commercial cylinder is priced at nearly ₹3,000, which places it above the ₹2,000 threshold and squarely within the specified categories.

What remains unclear to distributors is whether domestic refills sold to households will also attract the fee.

A 14.2-kg domestic cylinder costs less than ₹1,000, so a single sale falls below the threshold. However, distributors say a common practice in the trade could bring them under the levy.

"Delivery boys collect payments on their individual UPI accounts for the refills they supply through the day to households. In the evening, they transfer the sum collected to the distributor. But from October 15, such bulk remittances are likely to attract the MDR," said Jagan Mohan Reddy, president of the Telangana LPG Distributors Association.

He said the arrangement has become routine because distributors do not share a QR code with each delivery person. The pooled transfer at the end of the day can exceed ₹2,000, even though no individual household payment does.

Distributors to cite thin margins

Reddy said distributors are studying the likely impact and plan to approach the government soon seeking an exemption. Like petroleum dealers, cooking gas distributors are expected to point to the fixed, thin margins on which they operate, arguing that a new per-transaction cost would be difficult to absorb.

Their representation is likely to follow a similar one expected from fuel retailers, who fall under the same specified category in the NPCI framework.

Why NPCI chose a flat fee

Announcing the framework, NPCI said the flat ₹5 charge for these merchant categories would apply instead of a variable rate of 0.4% on transactions above ₹2,000.

The corporation said a fixed fee, rather than a percentage, would prevent cost escalations in critical public services, utility bill collection and thin-margin sectors such as fuel retail. It said the design is intended to keep essential consumer services low-cost and digitally efficient.

In effect, NPCI's reasoning runs parallel to the distributors' concern: both sides acknowledge that margins in these sectors are tight. The dispute is over who bears the new cost and whether household LPG delivery chains fall within the intended scope of the levy.

What happens next

The framework is scheduled to take effect from October 15. Until the government or NPCI issues clarification, distributors say they cannot be certain whether the fee will apply only to commercial cylinder sales, or also to the pooled settlements that underpin home deliveries.

Any exemption or clarification would settle a question that affects not just distributor earnings but also the daily payment routine of delivery personnel who collect cash and digital payments from households across the country.