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Correspondent

23 August 2024 at 9:59:04 pm

Costly Convenience

The National Payments Corporation of India (NPCI) has blinked. By deferring the introduction of a Merchant Discount Rate (MDR) on the Unified Payments Interface (UPI) until immediately after Diwali, policymakers have acknowledged a delicate economic reality that tampering with India’s primary digital economic engine right before the festive shopping peak could trigger an unwanted consumer slowdown. Yet, it appears that the era of entirely free digital liquidity is drawing to a close. The...

Costly Convenience

The National Payments Corporation of India (NPCI) has blinked. By deferring the introduction of a Merchant Discount Rate (MDR) on the Unified Payments Interface (UPI) until immediately after Diwali, policymakers have acknowledged a delicate economic reality that tampering with India’s primary digital economic engine right before the festive shopping peak could trigger an unwanted consumer slowdown. Yet, it appears that the era of entirely free digital liquidity is drawing to a close. The updated framework targets Person-to-Merchant (P2M) transactions exceeding Rs. 2,000 with a 0.4 percent levy. To shield the grassroots network, small traders processing under Rs. 1 lakh monthly remain exempt, and consumer transactions remain strictly free. But the decision to monetise the network exposes the core friction of digital public infrastructure (DPI), which is balancing universal financial access with long-term commercial sustainability. Until now, the UPI functioned as a state-subsidised public utility. This zero-MDR regime was brilliant for financial inclusion, converting cash-reliant vendors into digital participants. However, it forced banks and payment applications to bear heavy infrastructure costs without direct returns. The upcoming MDR framework aims to rectify this structural imbalance through a tiered approach, applying a standard commercial fee on high-value transactions that is capped safely at Rs. 300. Strategic concessions for essential sectors like utilities, education and insurance enjoy a flat Rs. 5 fee to protect low-margin public services, while capital markets face a razor-thin 0.02 percent levy to ensure financial market liquidity is not disrupted. Placed in a global context, India’s proposed levy is remarkably modest, operating as a sophisticated middle path between Western commercial duopolies and state-dominated Asian models. In the West, credit card interchange fees heavily penalise merchants, with Visa and Mastercard frequently extracting between 1.5 percent and 3.5 percent per transaction. Conversely, China’s digital landscape is dominated by private tech giants WeChat Pay and Alipay, which charge a standard 0.6 percent fee on commercial transactions. While the policy includes safeguards against passing costs to consumers, economic history suggests that legal mandates rarely suppress market forces completely. Merchants operating on thin margins may adjust by raising baseline shelf prices or quietly nudging buyers back toward cash for larger transactions. The structural risk lies in fragmentation. The Rs. 2,000 threshold creates a distinct regulatory cliff, tempting merchants to split single high-value invoices into multiple smaller transactions to bypass the levy. Furthermore, payment aggregators will face intense compliance overheads as they monitor merchant volumes to enforce the Rs. 1 lakh exemption threshold. The post-Diwali rollout marks a shift from state-funded growth to a self-sustaining financial ecosystem. India’s digital payment ecosystem has achieved the scale required to absorb network fees, but the true test will be whether this framework can fund technological innovation without reversing India’s hard-won cash-to-digital migration.

Bad Roads, Ugly Politics

Suyash Padate
Nov 1, 2024
2 min read

The pathetic state of roads in Mumbai city as well as its suburbs has made daily commute a dangerous affair. The residents are miffed with the BMC over its lackadaisical attitude. Mumbaikars tweet photos, post videos to grab attention, but everything is in vain. Who cares for the common people. Backbreaking journeys have become part and parcel of life. Political leaders are busy mud-slinging.


This year the monsoon took a break after almost four and half months. During this time some of the roads virtually became non commutable. It may be recalled that the Chief Minister Eknath Shinde first announced to make Mumbai roads pothole free.


Its almost two years now the BMC has concretised only 9 percent of roads it planned to concretise. This decision was taken when it came to light that due to the properties of bitumen in asphalt roads, potholes are a regular occurrence due to contact with water during monsoons.


Hence, to solve the problem of potholes, the corporation has adopted a policy of cement concreting of 6-meter-wide roads in phases. The decision was taken but the dilly-dallying affair made things more difficult.


Mumbai’s traffic does put a lot of strain on roads which is not the case in the other developed countries. Second most important aspect is concretisation of roads is done partly and in phases.


The worst problem which is faced is repeated digging for cables and drainage, which weakens the roads. Above all corruption in BMC makes matters worse as a result everything comes to grinding halt.


According to experts, repairing potholes is a reaction with symptomatic treatment. By and large we are dispensing superficial treatment without addressing the root cause. The long-term solution will be to have roads with no potholes but what we need is the means and technology to achieve this. But for this political will is necessary which we lack on every step.


Mumbaikar’s are convience that corruption in the municipal corporation is the main reason. Contractors have had a monopoly over the last 20 years and this is the reason why reputed companies never come ahead for these projects.


As a result, in the name of attendance and repair, the BMC does shoddy work. Crores are spent but the end result is nothing. The BMC is not paying attention to the crust. If the crust is weak, potholes will see an increase. Without any thought or technical know-how, potholes are filled with cold mix.


This is the reason why the city and suburbs continue to have craters on the roads.


Craters, a serious threat to the safety and security of people. Mumbaikars fade up from their repeated visits to orthopedic surgeons.


They are in a mood to teach a proper lesson to those who were at the helm of the affairs.

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