Why Cashback on Cashless Fuel Transactions is NOT Helpful

Don't think cashback on card transactions will help you save money...

On 13th December, Indian government announced a cashback scheme for people filling fuel at petrol stations by digital means. The cashback was kept at a flat 0.75 percent of the transaction value (more details).

Back then, all card charges were waived off but since 1st January 2017, all charges are back and this is where this scheme has fallen flat! To quote an example, one of my friend recently refuelled his Renault Duster for Rs 2000 expecting some gain in the transaction.

A day after, he was levied a fuel surcharge of Rs 57.50 which is equal to about 2.87 percent of the transaction value. Two days after the transaction, he received the promised cashback of Rs 15 in his debit card account. So here is the maths..

  • Fuel filled = Rs 2000
  • Total amount paid (including fuel surcharges) = Rs 2057.50
  • Gross amount paid (deducting Rs 15 cashback) = Rs 2042.50
  • Final gain = – Rs 42.50 Loss

Had he paid with cash, which he generally does, he would have saved these additional Rs 42.50 which is almost equal to 65% of the cost of 1 liter of diesel. Simply put, he could have filled more than half a liter of diesel in his Duster which would have taken him for another 10-11 kms.

So, the point is – how does the government think that by providing 0.75% cashback, they will lure people into cashless transactions? Yes, this scheme may be beneficial for people who are frequent (and okay) with (extra charges on) card transactions or buyers who use cards which offer zero surcharge on fuel. But then these handful of guys are already transacting digitally so if they continue doing that, there is no gain actually.

There must be mechanisms to abolish card charges to promote cashless transactions otherwise such schemes will bear no fruit. There is already a battle brewing between pump owners and banks over transaction fees. Pump owners have threatened to stop card payments from Friday.

Also Read: Motorcycling Etiquette: An Insight For Dummies – What NOT to Do!

Do cast your views below on this ‘cashless transaction’ thing….

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