Indian oil companies, engaged in retail sales of petroleum products, are set to terminate discounts on fuel charges when purchased through card payments.
Livemint.com reported quoting people familiar with the matter.
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Under a government directive, all oil companies are offering a 0.75% discount on card payments for petrol and diesel purchases since the demonetisation in late-2016.
The initiative was primarily driven with an aim to encourage digital payments when the government withdrew high-value currency notes.
Following the decision, the three state-run oil companies – Indian Oil, Bharat Petroleum and Hindustan Petroleum -offered the cash back.
The discounted amount is credited to the buyer’s account in three working days following the transaction.
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By GlobalDataIn addition to the cash discounts, the oil companies also provide the card payment charges called merchant discount rates (MDR), which is usually borne by the retailer.
In 2017-18, the oil companies said to have paid INR11.65bn ($160.5m) in discounts and INR2.66bn ($36.65m) for MDR.
An official from one of the oil marketing companies was quoted by the publication as saying: “Our concern is that the discount level should be reduced because it is draining us of cash. This also something that we are not able to pass on to the customers.”
The termination of the discount service will help the oil companies to reduce their burden as in the current fiscal year the total amount of discounts forwarded to the customers is expected to touch INR20bn.
The discounts on card payments and other e-wallet payments are scheduled to continue till March next year.
The report also stated that the number of digital transactions for the oil marketing companies soared from 10% in 2016 to nearly 25% in this year.
