According to reports, the majority of fuel stations across the country have stopped accepting credit or debit card payments. A merchant discount rate (MDR) of 1.5 percent is charged by commercial banks. For the purchase of petrol and diesel, consumers have no choice but to pay in cash.
“Banks receive Rs3.45 in MDR from our profit ratio of Rs3.68 on one liter of petrol and diesel purchased by a consumer using credit or debit cards. ” an oil marketing company (OMC) official told The News, “and this is how the margin gets squeezed to just Rs0.23 per liter, making the financial health of OMCs more vulnerable.”
According to annual sales figures for motor petroleum and diesel, the country has consumed 20 billion liters. 400 million liters were sold using credit and debit cards, and assuming an average price of Rs. 230 per liter, the value of bank card sales was Rs. 92 billion per year.
Furthermore, banks charge 1.5 percent MDR on one liter and earn Rs. 1.38 billion in MDR from OMC margins rather than consumers. The OMCs’ annual profit ratio on bank card sales is Rs. 1.472 billion, with banks receiving Rs. 1.38 billion, leaving a net margin of Rs. 92 million.
Furthermore, on behalf of the OMCs, the oil companies’ advisory council (OCAC) wrote a letter to the State Bank of Pakistan (SBP) on August 22, 2022, raising the issue of banks charging higher MDR.
The OCAC made a case for the OMCs in the letter and requested a review of the MDR rate of 1.5 percent on fuel purchases made with credit or debit cards, claiming that while the MDR varies across the industry, banks charge an average of 1.5 percent at petrol pumps across the country, and the cost is borne by the OMCs and their dealers.
Furthermore, given the high turnover of fuel, the OCAC’s recommendation to the SBP governor is that MDR on fuel purchased be capped at 0.3 percent in order to assist customers while not burdening OMCs and dealers.