2 yrs after demonetisation, cash still king at petrol pumps, rail stations

Digital transactions have seen a minor increase even after government's push

Indians love the feel of cold hard cash, demonetisation or not. Scores of mobile wallets and government initiatives — including launching digital payment platforms such as Unified Payment Interface (UPI), Bharat Interface for Money (BHIM) — have not been able to cut down cash transactions in various areas. Unreserved railway ticketing and payments at petrol pumps, which together constitute almost 25 per cent of the market for digital transactions, are witnessing the lowest amount of traction.

Experts believe that even two years after demonetisation, lack of specific infrastructure as well as convenience factor are preventing the use of digital money in these areas.   

Soon after demonetisation, the government announced massive drive for digitisation in consumer-centric fuel sector and railways. However experts estimate that even after spending close to Rs 10 billion in advertisements and incentives the government has not witnessed much growth in these two areas.

According to multiple sources close to the development, digital ticketing transactions by railways just increased from 58 per cent in November 2016 to around 68 per cent to date. The government was planning to digitise unreserved ticketing category which constitutes a major chunk of railways bookings. However after running multiple tests and pilots, the government has not managed to zero in on the technology or the private players to handle it.

Mobile wallets including Paytm and MobiKwik had approached the government with their plans on how to digitise it but all talks fell flat. “We had a ready plan and we had approached the government with the same. We were planning to use geo-tagging and geo-positioning for over-the-counter buying of tickets. The plan was to ensure that the ticket is bought digitally when one enters the railway station and not after they have boarded a train. All the transactions would have been handled by our wallet and IRCTC. However the whole plan lost steam,” said a senior vice president at mobile wallet Paytm.

He added that if the plan had gone through almost 20 per cent of the transaction on their wallet would have been for unreserved ticketing. It was on December 8, 2016 that the sops for digital transactions on various segments including railways was announced. Railway Board's member (traffic) Girish Pillai had said recently that the overall digital ticketing base of railways is now around 68 per cent. To push digital transactions, the government had levied service charge for tickets booked through Indian Railway Catering and Tourism Corporation website and had also lined up 5 per cent discount on payments made online for availing services like e-catering and online booking of retiring rooms. This had wiped out the entire revenue of IRCTC to the tune of Rs 5 billion per annum.  

On the other hand, for oil marketing companies such payments have only seen a minor growth, though 0.75 per cent discount is being given to consumers on the purchase of fuel at the petrol pumps of the Oil Marketing Companies (OMCs). The discount was applicable on debit or credit card payments, mobile wallets and prepaid loyalty cards. 

"Our digital transaction base has increased by around 2 per cent — from 22 per cent to 24 per cent —in the last two years," said S Jeyakrishnan, director marketing of Hindustan Petroleum Corporation (HPCL). Similarly, Indian Oil Corporation's share has increase by around 4 per cent from 24 per cent pre-demonetisation to 28 per cent now. IOC Director of Marketing Gurmeet Singh said the major reason for such low figures is the less number of transactions in LPG, where minimal number of consumers are preferring digital mode, despite Rs 5 discount on booking cooking gas cylinder online.

More on business-standard.com

According to many, this is a major blow for the digital drive of the government as the OMCs had gone for aggressive campaigns too, in addition to the discounts.

"In the form of these discounts, companies have lost millions. In addition, there were marketing campaigns. It seems to be yielding no profit as sales in our outlets have come down to the pre-demonetisation level or even less that, with more cash on circulation," said Ajay Bansal of All India Petroleum Dealers Association.

As per the initial estimates, state-run oil marketing companies were expected to take a hit of about Rs 24 billion annually due to the 0.75 per cent discount. It is estimated that petrol and diesel worth Rs 18-20 billion is sold per day to the customers on a daily basis in India.

According to wallet players it is mostly inconvenience that prevents customers from using mobile wallets, cards and other means of digital transactions at petrol pumps.

“Mobile phones cannot be used right at the filling station due to fire safety reasons. As the QR code cards are kept a little further, it creates a bottleneck and confusion at a place where the customer turnaround time is less than five minutes. With debit cards there are connectivity issues, so in general petrol pumps prefer cash,” said a senior associate at MobiKwik.