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India's petrol pumps and banks are now fighting over transaction fee on plastic money

Gas stations won't pay the extra tax levied on card payments.

Sohini Mitter

on January 9, 2017

Original image has been replaced. Credit: Mashable

Another day. Yet another about-turn.

In a move that could seriously cripple India's cash-strapped population, nearly 56,000 gas stations (locally known as petrol pumps) have decided to stop accepting plastic currency, after the country's top four banks levied a 1% transaction fee on card payments.

The Times of India reported that refueling stations threatened to ban cards almost immediately, until the government intervened and extended the deadline by another week.

Two of India's top banks, ICICI Bank and HDFC Bank, account for some 60 percent of card swipe machines installed at petrol pumps.

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Hence, when these institutions chose to levy an extra fee on card transactions, which cannot be passed on to the customer, the All India Petroleum Dealers Association (AIPDA) revolted.

The banks' sudden move caught even the government and India's Oil Ministry by surprise. However, officials have negotiated with them and convinced banks to postpone levying the transaction fee to Jan. 13.

Gas station owners have yielded for now and deferred their strike.

India's citizens, already struggling with the after-effects of note ban, aren't amused though. Some even think that the additional price would eventually have to be borne by the customers.