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23 August 2024 at 9:59:04 pm

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain...

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain free irrespective of the amount, while merchant payments up to Rs. 2,000 remain free. Small merchants receiving up to Rs. 1 lakh a month through UPI QR codes will also continue to enjoy zero MDR. The government says roughly 96 percent of merchant transactions will remain unaffected. So, technically, the customer is exempt. MDR is not a tax collected by the government or NPCI. It is a charge within the payments ecosystem, to be shared among banks, payment-service providers and UPI application providers. But that does not make the economics irrelevant to customers. A merchant who previously accepted a large UPI payment at no direct payment cost will now have to absorb a fee. The government has advised banks to ensure that merchants do not pass the MDR on to customers. The economic reality is less tidy. Businesses ultimately recover costs through their overall pricing. Whether the new charge appears as a visible surcharge, a change in discounts or simply becomes part of the cost of doing business will depend on the merchant and the market. That is why the real beneficiaries of the new framework are not necessarily the customers alone. Payment companies, banks and other participants in the UPI ecosystem acquire a new revenue stream from transactions that were previously free. Paytm, for instance, has said the new MDR will generate additional revenue from merchant transactions that earlier carried no such charge. The money is therefore being redistributed within the payments ecosystem. Small businesses are deliberately insulated, an important distinction in an economy where street vendors and neighbourhood shops have adopted QR payments because they are cheap and frictionless. There is also a larger question. UPI became ubiquitous partly because its basic proposition was brutally simple: instant payments without a visible charge. Introducing MDR for a slice of transactions changes that economic model. The government’s argument is that UPI needs a sustainable financial architecture as its scale grows. But sustainability should not be confused with costlessness. Someone has to finance the infrastructure, security and technology behind a system processing billions of transactions. For now, the customer remains protected. The real test will be whether merchants absorb the cost without quietly transferring it through prices and whether the revenue flowing to banks and fintech companies translates into a stronger, more resilient UPI ecosystem rather than simply a new source of income for its intermediaries.

Plastic Waste Amendments Aim to Rein in Pollution

Writer: Dr. Sanjay Joshi
Dr. Sanjay Joshi
May 15
3 min read

The latest plastic waste management amendments aim to reduce long-term plastic pollution through safer, more complete decomposition of plastics.

The Plastic Waste Management Rules have undergone several amendments over the years to address emerging environmental concerns and implementation challenges. The changes introduced in 2018 and 2022 focused on issues such as multi-layered plastics, registration systems, thicker carry bags, recycled plastic packaging, and Extended Producer Responsibility (EPR). These amendments sought to balance environmental protection with practical and industry-related concerns.


Building on these earlier reforms, the Plastic Waste Management (Amendment) Rules, 2024, were notified by the Ministry of Environment, Forest and Climate Change (MoEFCC) on March 15, 2024. The latest amendments introduce stricter regulations for biodegradable plastics, redefine key stakeholders such as importers and manufacturers, strengthen EPR provisions, and place greater emphasis on the management of microplastics. They also prescribe stricter standards to ensure that biodegradable plastics degrade without leaving behind toxic residue or microplastics.


The significant amendments to the Plastic Waste Management Rules in 2024 include a revised definition of biodegradable plastics, with emphasis on their ability to degrade without leaving behind microplastics. The Rules also specifically define microplastics as solid plastic particles of certain dimensions, recognising their growing environmental threat.


Further, the scope of the term “importer” has been expanded to cover a wider range of plastic-related materials, while the definition of “manufacturer” now includes those involved in different stages of plastic production. These changes reflect a stronger attempt to tackle plastic pollution in India through stricter standards and greater regulatory clarity.


Biodegradable plastics are defined under the amended rules as materials capable of breaking down through biological processes in specific environments such as soil and landfills, without leaving behind microplastics. The Rules also define microplastics as solid plastic particles of a particular size range that do not dissolve in water. These definitions are significant because they bring greater clarity to the regulation of plastic waste and its environmental impact.


Plastic Pollution

The focus on biodegradable plastics is aimed at reducing long-term plastic pollution by encouraging the use of materials that can decompose more completely and safely. At the same time, the recognition of microplastics as a separate category is important because these particles are a growing source of water and soil pollution. Microplastics not only harm aquatic ecosystems and marine life but can also enter the food chain and pose risks to human health.


The revised definitions also encourage industries to adopt more sustainable practices in plastic production, packaging, and waste management. By setting clearer standards, the Rules seek to improve accountability and ensure that manufacturers and producers follow environmentally responsible practices. Clearer definitions further make it easier for regulatory authorities to monitor compliance and enforce environmental standards more effectively.


The 2024 amendments therefore strengthen the overall framework for plastic waste management in India. They represent an important attempt by the government to address plastic pollution through better regulation, improved waste management practices, and greater emphasis on sustainability and resource conservation. The changes also align with the broader goal of reducing environmental degradation caused by excessive plastic use.


Another important provision introduced through the amendments is that manufacturers producing carry bags and commodities made from compostable or biodegradable plastics must obtain certification from the Central Pollution Control Board (CPCB) before marketing or selling such products. This provision is intended to prevent false or misleading claims regarding biodegradable plastics and to ensure that only approved materials enter the market.


The amendments also promote the recycling and reuse of plastic packaging waste by prescribing mandatory Extended Producer Responsibility (EPR) targets and encouraging the use of recycled plastic content. These measures seek to create a circular economy in which plastic waste is continuously reused and repurposed instead of being discarded after a single use. In the long run, such measures are expected to reduce environmental damage and strengthen sustainable waste management practices in India.


More on this in my next article. Till then, have a great weekend!


(The writer is an environmentalist. Views personal.)

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