“Initially there may be slight disruptions. But I don’t apprehend it in the long run as credit card holders get, on an average a credit cycle of 40 days, besides reward points —Sunil Khosla, digital head, india transact services ltd
Vijay C Roy
Tribune News Service
Chandigarh, September 25
The decision of oil marketing companies to discontinue the discount on making payment at petrol pumps by credit cards from October 1 will be a big disappointment for consumers and dent the spirit of cashless economy, say petrol pump dealers of the northern region.
Already, the northern region is a laggard in digital transactions as compared to the southern and western region where the penetration of digital transactions is as high as 40-45% in cities and between 15-20% in the rural areas.
In the northern region, it is around 35% in cities and less than 10% in the rural areas. The region has around 8,000 petrol pumps.
“We have told the banks to discontinue the cashbacks only for credit card users from October 1,” said a senior official working with an oil marketing company.
However, cashbacks or discounts for users of other digital payment methods will continue. Already State Bank of India has informed its customers through SMS in this regard. “…as advised by public sector oil marketing companies (OMCs), the 0.75% cashback on fuel transactions will be discontinued with effect from October 1,” a message sent by SBI Cards to users said. Insiders said other banks will also follow the suit. However, the discount on debit card and other digital modes of payments would continue.
Cashback on fuel purchases was introduced by the government to promote digital payments due to a widespread cash crunch after demonetisation in late 2016.
According to dealers, the transactions via digital means were very low during the pre-demonetisation period. However, post- demonetization, with the government announcing cash discounts and directing OMCs to bear the burden of merchant discount rate (MDR), which is usually paid by the retailer, the digital transactions went up to 28%.
“With this decision, the transactions through credit cards may go down. As of today, nearly 30% of transactions in the urban areas are through cards and wallets,” said Monty Sehgal, spokesman, Petrol Pump Dealers Association Punjab.
However, the industry in digital payment space feels that initially the number of transactions may go down but after three months the transactions will go up with more vehicles added on roads coupled with more fuel outlets added across the country.
“Initially there may be slight disruptions. But I don’t apprehend it in the long run as credit card holders get, on an average a credit cycle of 40 days, besides reward points. We anticipate the withdrawal of incentives may compel banks and oil marketing companies to introduce loyalty programmes to attract new customers and retail existing customers,” said Sunil Khosla, Digital Head, India Transact Services Ltd, an Omni-channel digital payment solutions provider company.
Meanwhile, HDFC Bank and Indian Oil today launched a co-branded fuel credit card for users from non-metro cities and towns. The company claims that it offers the highest reward points and benefits on fuel consumption. These points can be redeemed for up to 50 litres of fuel annually.
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