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Tuesday, 10 January 2017 03:57
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Can’t make PSUs or banks pay, this boosts govt taxes


Oil minister Dharmendra Pradhan has done well to, for now, defuse the immediate tension over petrol pumps refusing to accept debit/credit card payments after some banks said they would charge a one percent commission on the transactions. While a decision will be taken on who will bear the burden, the confusion shows the government still doesn’t have a cohesive plan for digital payments – else, why would it announce a slew of incentives for this a few weeks ago and, by not now stepping up to make the payments, risk losing the momentum of the past few weeks? A 50% jump in debit/credit card payments, and not just at petrol pumps, means (based on data for four banks only) Indians are spending upwards of Rs 50,000 crore a month through debit/credit cards – data for the first few days of the new year confirms the December trend. If Rs 6 lakh crore of transactions are going to take place using plastic, that means a fee of around Rs 6,000 crore. This is not something petrol pumps or retailers would like to pay for low-value transactions given their profit margins – asking banks to waive it will lower their incentive to roll out debit/credit card mahines, so that’s not an option either.



So, now that more cash is coming back into the system, both merchants and customers would be happy to go back to the old cash payments if the alternative is to pay transaction charges. Naturally the government wouldn’t want that since this will ensure transactions that were getting tracked – and could potentially be taxed – will move out. In which case, the most sensible option is for the government to pay the banks directly for the commission charges and, meanwhile, find ways to lower the costs by, for instance, trying to move users to bank wallets, direct bank-transfers of the BHIM type or using mobile PoSs. Given the number of digital payment committees set up by the government, the lack of clarity on how to promote digital payments is unfortunate.



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