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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.

The 2016 Turning Point in India’s Plastic Waste Story

Writer: Dr. Sanjay Joshi
Dr. Sanjay Joshi
May 1
3 min read

Extended Producer Responsibility brought producers into the waste chain—not as bystanders, but as accountable actors.

In my last article, I traced the rise of plastics in India — from the early growth of the industry to the explosion of single-use plastics in the 1990s that created mounting environmental concerns. I also looked at how the government began responding through the first plastic waste regulations in 1999 and the stricter rules introduced in 2011.


However, those early regulations were only the beginning. As plastic waste continued to grow in scale and complexity, the government moved to strengthen and broaden the legal framework.


In supersession of the Plastic Waste (Management and Handling) Rules, 2011, the Ministry of Environment, Forest and Climate Change, Government of India, notified the Plastic Waste Management Rules, 2016. The 2016 rules marked a significant shift in India’s plastic waste policy, with several important provisions that deserve closer attention.


One important change was the increase in the minimum thickness of plastic carry bags from 40 to 50 microns, along with a minimum thickness of 50 microns for plastic sheets, in order to facilitate the collection and recycling of plastic waste.


Another major shift was the expansion of the rules from municipal areas to rural areas, recognising that plastic waste had spread well beyond cities.


The rules also sought to bring producers and waste generators more directly into the plastic waste management system, including through a collect-back mechanism for plastic waste by producers and brand owners under the framework of Extended Producer Responsibility (EPR).


They also introduced plastic waste management fees through the pre-registration of producers, importers of plastic carry bags and multilayered packaging, and vendors selling the same, with the aim of supporting the waste management system.


The 2016 framework further promoted the use of plastic waste in road construction, in accordance with Indian Road Congress guidelines, as well as for energy recovery and waste-to-oil processes, as part of efforts towards gainful utilisation of waste.


Greater responsibility was also placed on waste generators. Institutions and establishments were required to segregate and store waste in accordance with the Solid Waste Management Rules and hand over segregated waste to authorised waste processing or disposal facilities or deposition centres, either directly or through authorised waste collection agencies.


All waste generators were also required to pay such user fees or charges as may be specified in the bye-laws of local bodies for plastic waste management, including waste collection and the operation of related facilities.


Even event organisers were brought within the ambit of the rules. Every person responsible for organising an event in an open space, where foodstuffs were served in plastic or multilayered packaging, was required to segregate and manage the waste generated during such events in accordance with the Solid Waste Management Rules.


The local bodies, meanwhile, were entrusted with the responsibility of setting up, operationalising and coordinating the waste management system and performing associated functions. Retailers and street vendors were also prohibited from selling or providing commodities to consumers in carry bags or multilayered packaging in violation of the rules, with penalties for non-compliance under local bylaws.


Another notable provision was that non-recyclable multilayered plastic, if any, was to be phased out within two years.


Among all these changes, one of the most significant was the inclusion of Extended Producer Responsibility (EPR). The Plastic Waste Management Rules, 2016, mandated that producers, importers and brand owners be responsible for collecting and recycling their plastic waste. In later amendments, this framework was strengthened further through year-based targets for collection and recycling, mandatory registration with the Pollution Control Board (PCB) and the EPR portal, as well as recycled content requirements for plastic products and reuse targets for product packaging.


I will discuss a few more details and the continuing challenges in implementation in my next article. Till then, have a wonderful weekend.


(The writer is an environmentalist. Views personal.)

 


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