From the Viewsroom

From the Viewsroom: Unkind generosity

Anand Kalyanaraman | Updated on January 13, 2018

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Discount on buying petrol by card is fine, but who foots the bill?

It’s easy to be generous with other people’s money. Just that it’s a bad idea. The Government has been repeatedly dipping into the pockets of the public sector oil companies. Reports say that Indian Oil, HPCL and BPCL will bear the merchant discount rate (MDR) on debit card transactions at petrol pumps until March. This charge, levied by banks on merchants for card transactions, had been waived by the Government during the demonetisation phase until December to push digital payments. But when it was brought back in January, petrol pump owners protested and threatened not to accept card payments. The subsequent negotiations have now apparently resulted in the oil companies agreeing to foot the bill, no doubt nudged by the Government.

There’s more. It is reported that the 0.75 per cent discount offered to customers on digital payments at petrol pumps will also be borne by the oil companies. Earlier, the Government had indicated that it would fund this discount but it seems to have changed its mind. These charges and discounts hurt the bottomline of the oil companies and harm shareholder interests.

Even if these entities were fully owned by the Government, such arm-twisting would be perverse. The Government’s actions are tantamount to riding roughshod on minority shareholder interests. It would be even worse if the oil companies were passing on these additional costs to customers across the board through their regular fuel price changes. Promoting digital payments is great. But the Government must be ready to pick the tab. It’s unfair to shift the burden on to product or service providers.

Anand Kalyanaraman Senior Assistant Editor

Published on March 02, 2017

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