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By:

Sumit Ranjan Das

21 August 2024 at 4:08:59 pm

UPI Must Stay Free

AI Generated Image Yesterday, I went to my neighbourhood shop to buy aloo chop and vegetable chop to eat with muri. I reached for my phone to pay by UPI, as I do for almost everything. The shopkeeper stopped me. “This is the last time we’ll accept UPI. From tomorrow, CASH ONLY.” I didn’t argue or explain that payments up to Rs. 2,000 remain free. It would have been a waste of breath. So I let it go, but I kept thinking about it on the walk home because I think I know what he was afraid of....

UPI Must Stay Free

AI Generated Image Yesterday, I went to my neighbourhood shop to buy aloo chop and vegetable chop to eat with muri. I reached for my phone to pay by UPI, as I do for almost everything. The shopkeeper stopped me. “This is the last time we’ll accept UPI. From tomorrow, CASH ONLY.” I didn’t argue or explain that payments up to Rs. 2,000 remain free. It would have been a waste of breath. So I let it go, but I kept thinking about it on the walk home because I think I know what he was afraid of. Picture a vegetable vendor with a pushcart at the corner of your lane. Call him Ramesh. He studied up to Class 8. Two years ago, he put a QR code on his cart because someone told him one thing: “Bhaiya, UPI is free. The money comes straight to your bank.” That one sentence did more for Digital India than any seminar. No card machine, no fee, no paperwork. Now tell Ramesh that a Merchant Discount Rate (MDR) may apply to specified transactions above Rs. 2,000, subject to exemptions. He won’t argue. He will put up a board: CASH ONLY. MDR is the fee a merchant pays to accept a digital payment, and UPI has been free for merchants since 2020. The new framework proposes a fee of 0.4 per cent on specified merchant transactions above Rs. 2,000, with a cap of Rs. 300 on transactions above Rs. 75,000. Payments up to Rs. 2,000 remain free. Person-to-person transfers are not covered, and under the announced plan, customers are not charged directly. On a Rs. 10,000 merchant payment, the merchant would pay Rs. 40. Small merchants receiving less than Rs. 1,00,000 a month through UPI were proposed to be exempt. One report adds that the committee was reportedly considering exempting businesses with annual turnover of up to Rs. 40 lakh. On October 13, the National Payments Corporation of India (NPCI) said the fee, due to be implemented on October 15, would be introduced immediately after Diwali, on a date to be notified separately. The decision merley postpones the fee. Consider Ramesh again. Suppose he sells Rs. 5,000 worth of vegetables a day, mostly through payments of Rs. 30 to Rs. 300. That amounts to around Rs. 1,50,000 a month, or roughly Rs. 18 lakh a year. Every one of his payments is below Rs. 2,000, so under the proposal, they remain free. But his monthly receipts exceed Rs. 1 lakh, which means he cannot simply assume that the small-merchant exemption covers him. Who will tell him? Who will explain it in Bengali, Hindi or Maithili, at his cart, in two minutes? A vendor who cannot understand the rules will choose the option that feels safest: cash. Cash is not the enemy. But for a small merchant, it also means hunting for change and losing customers who do not have it, facing the risk of theft, loss and counterfeit notes, spending time counting, storing and depositing money, and having fewer digital records to show a bank when seeking credit. “Free” does not mean UPI costs nothing to run. Security, fraud control, banking systems and customer support all require money. In March 2025, the Union Cabinet approved an incentive of Rs. 1,500 crore for low-value BHIM UPI merchant transactions for the financial year 2024–25. Genuine welfare must never be treated as a piggy bank. Every rupee, whether spent on welfare or infrastructure, should deliver greater value. Five measures would help keep UPI simple. First, person-to-person UPI transfers must remain free. Sending money to family should never come with an unexpected charge. Second, protection for small merchants must be straightforward. Thela-walas, tea stalls and kirana shops need one clear exemption, not five clever ones. Third, UPI must be funded transparently. The government and relevant institutions should publish what it costs to run the system, how much public money supports it, how much any proposed fee collects and what results follow. Fourth, the rules must be explained in local languages. A one-page notice or a short voice message through a payment app would reach Ramesh faster than a 20-page circular. Finally, the impact must be measured before any fee is extended. Changes in small-merchant acceptance and transaction volumes should guide the next step. India did not build UPI by making it clever. It built it by making it simple and free. (The writer is a Cost and Management Accountant and founder of TaxoDas. Views personal.)

The Dragon’s Expanding Sea

May 25
4 min read

China’s creeping conquest of the South China Sea is testing the limits of international law and the resolve of the world’s democracies.

Few lines have caused as much anxiety in the cartographic theatre of our times as the one China insists on drawing across the sea. The “nine-dash line,” an ambiguous crescent looping deep into the South China Sea, transcends the limits of a mere maritime claim. It is Beijing’s geopolitical doctrine and a challenge to the post-war international order.


Strategic Waters

Stretching across waters contested by Vietnam, the Philippines, Malaysia, Brunei and Indonesia, the line encompasses almost the entirety of the South China Sea, one of the world’s busiest maritime arteries through which trillions of dollars in trade pass through it annually. Beneath its waters lie fisheries, hydrocarbons and strategic routes vital to Asia’s economic future. To Beijing, these waters are part of China’s “core interests” - a term also reserved for the sanctities of Tibet, Xinjiang and Taiwan.


China’s justification is steeped in history. Official narratives frequently invoke the Western Han Dynasty and ancient Chinese mariners supposedly traversing these waters as early as the second century BCE. Historical memory, in Beijing’s telling, confers sovereign legitimacy. Yet modern international law is rather less sentimental. Under the United Nations Convention on the Law of the Sea (UNCLOS), maritime rights are governed not by imperial nostalgia but by clearly defined territorial and Exclusive Economic Zone (EEZ) principles.


But that has not restrained Beijing. Over the past two decades China has pursued what strategists call a ‘salami-slicing’ campaign, incremental moves without provoking outright war. Collectively, however, China’s steps amount to a slow-motion redrawing of Asia’s maritime map.


China is increasingly behaving like an archipelagic state akin to Indonesia or the Philippines, claiming rights over waters between island groups as though they were internal seas. Yet UNCLOS recognises only a limited set of nations under such a framework, and China is not among them. Nevertheless, Beijing has persisted in treating contested waters as sovereign space, demanding deference from foreign vessels and aircraft.


More visible has been the transformation of reefs into fortresses. Across the Spratly and Paracel island chains, submerged atolls have been dredged into artificial islands complete with airstrips, radar stations, missile systems and harbours. What were once coral outcrops are now unsinkable military bases. Beijing then uses these engineered features to buttress wider EEZ claims, despite international rulings rejecting such interpretations.


Pressure Tactics

The strategy extends beyond conventional naval power. China has mastered the art of “grey-zone” coercion: pressure tactics deliberately designed to remain below the threshold of war. Instead of deploying destroyers alone, Beijing relies heavily on coast-guard vessels, fishing fleets and maritime militias. Swarms of fishing boats descend upon disputed waters, intimidating rival claimants while providing Beijing plausible deniability.


For smaller Southeast Asian states, the imbalance is stark. Filipino or Vietnamese vessels often find themselves shadowed, blocked or harassed by heavily armed ships of the China Coast Guard. Fishing communities that once operated freely now navigate an increasingly militarised sea.


Beijing’s most audacious manoeuvre, however, has been juridical. China routinely twists the language of UNCLOS to justify claims that the treaty itself plainly undermines. In 2016, the Permanent Court of Arbitration in The Hague delivered a sweeping rebuke, ruling that China’s expansive ‘historic rights’ claims had no legal basis under international law. The tribunal also determined that several contested features in the Spratly Islands were incapable of generating full EEZ entitlements.


China has simply ignored the verdict. Western powers, led by the United States, have attempted to challenge Beijing through Freedom of Navigation Operations (FONOPS), sailing naval vessels through disputed waters to demonstrate that these are international seas, not Chinese lakes. Yet such symbolic missions are sorely limited in efficacy.


Many analysts increasingly argue that occasional naval patrols and ritual diplomatic protests are insufficient against a power willing to combine patience, economic leverage and military intimidation. While China’s strategy is cumulative and long-term, the response to it often appears episodic and reactive.


Nor is Washington’s position entirely uncomplicated. America champions UNCLOS while never having ratified the convention itself, a contradiction Beijing has eagerly exploited. Meanwhile, perceptions of declining American resolve, heightened by Middle Eastern entanglements, domestic political polarisation and wavering strategic consistency, have emboldened Chinese assertiveness. The QUAD grouping of India, Japan, Australia and America has yet to evolve into the cohesive strategic bloc many once imagined.


India, too, occupies an increasingly pivotal role in this maritime contest. Though not a claimant in the South China Sea disputes, it has deep stakes in preserving freedom of navigation and resisting any precedent that allows powerful states to unilaterally redefine maritime norms. Beijing’s ambitions no longer stop at the ‘near seas.’ Through ports, infrastructure projects and naval deployments stretching from Gwadar to Djibouti, China is steadily expanding its footprint into the Indian Ocean and the wider Indo-Pacific.


If Beijing succeeds in normalising its expansive interpretation of maritime sovereignty, other revisionist powers may follow suit. The result would not merely be regional instability but the erosion of the very rules underpinning global commerce and navigation.


The South China Sea has thus become a laboratory for a new kind of geopolitical contest being fought through attrition and incremental encroachment. China’s genius lies in understanding that global attention spans are short, democracies divided and institutions slow-moving.


That leaves the international community with an uncomfortable choice. Either it collectively reinforces the legal norms embodied in UNCLOS and the Hague ruling, or it tacitly accepts a world in which might quietly supersedes right.


(The writer is a retired naval aviation officer and a defence and geopolitical analyst. Views personal.)

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