UPI fee is peanuts. Losing face for peanuts is nuts

The government on Tuesday opened a window. People are screaming about the door. The government is right about the need for fresh air. And people are right about a burglar sneaking in because a window, sooner or later, becomes a door. The benefits of keeping UPI free outweighed the cost of keeping UPI free, but the government had the itch to fix what wasn't broken, and now it must scratch in public. The stereotypical Indian thing to do.

First, let us get the boring part out of the way. Because the government thinks the argument ends with the boring part that has numbers. From October 15, a person-to-merchant UPI payment above Rs 2,000 will attract a Merchant Discount Rate (MDR) of 0.4%. A Rs 3,000 transaction costs the merchant Rs 12, a Rs 50,000 payment costs Rs 200, and anything Rs 75,000 and above is capped at a flat Rs 300. Person-to-person transfers stay free at any value, and those are 37% of UPI by volume and 70% by value. Micro-merchants under the P2PM tag, collecting up to Rs 1 lakh a month, stay at zero. Only about 4% of merchant transactions will be touched at all. The customer scanning the QR pays nothing extra, apps cannot add in a platform fee, and the merchant is not supposed to add it to your bill. Banks have been asked to keep an eye, god or the government knows how! Your chai, your auto, your sabzi, all untouched. This is a fee on a big Bonshuan bill, not Nandu tea stall.

So yes, peanuts. Capped peanuts. Peanuts paid by the shopkeeper, not the shopper. The government apparatus released a spreadsheet and the spreadsheet is right. Industry, read the banking sector, says running and securing the ecosystem costs around Rs 20,000 crore a year, and somebody has to pay the security guard.

Of course, banks would cry for support income for the infrastructure they maintain. They, however, wouldn't count the money that UPI saves them. Before UPI, they had to make more rounds to fill the ATMs. Fewer ATM visits per person, fewer teller transactions, cheaper customer acquisition. Consider that for all the banks and all their branches and ATMs. Only that saving goes a long way towards paying for the upkeep of the infrastructure.

Here is the problem with sex, lies, and damned statistics. People vote for the first two, nobody has ever voted for stats. People vote for a feeling. That feeling is the felt fact. The 0.4% will be read as a tax. It is not a tax. It goes to banks, not to the exchequer. Doesn't matter. In Heera Panna Complex, when a government department touches your money, it is a tax. When a middleman or interface touches your free thing, it is a theft. Nobody in Thateri Bazaar is going to look up the P2PM classification.

We have seen this picture before, and alternate endings. Demonetisation was a masterclass in mismanagement. Queues, deaths, a cash economy strangled overnight, and within two years, the RBI counted 99.3% of it back. By every stat, a fiasco. But by every feeling, a triumph. Nandu the Chaiwalla stood in the line believing the Nandu the Seth in the SUV was standing in a longer one. And the sense of triumph after standing in a queue with four demonetised Rs 500 notes and coming out with a Rs 2,000 note. Yeah! Nandu has performed the Vaishno Devi pilgrimage four times and he can't distinguish between the feeling there and the feeling at the bank teller in that cold November. That emotion, the rich are suffering more than me, carried the BJP to 312 seats in UP in 2017. The arithmetic was against it. Emotion won.

Reverse the polarity and you get 2024. There was no plan to change the Constitution. Not in the manifesto, neither in any speech. A rumour did the rounds that 400 paar was about the Constitution. The rumour cost the party its majority and reduced it to 240, below the simple majority mark. The maths said 400, the reality said 240, and arithmetic didn't stand a chance. Emotion won again. Emotion always wins.

Which brings us to the timing, and timing is everything in comedy, and in its genre called politics. This government is already fighting a perception war around the caste cauldron it stirred with the UGC meddling. Into that pot it has now dropped the one thing every Indian, poor and rich, uneducated to the elite, from Dadri to Dharavi, has come to trust without thinking: the free UPI payment. And it has done so 15 months after the Finance Ministry called reports of MDR on UPI "completely false, baseless, and misleading" and warned that such speculation creates needless fear and suspicion among citizens. When your own denial becomes your own notification, do not be surprised that the next denial lands as a promise.

Every gift is a trap, every cap is a floor. And the trust deficit is not a Congress creation. The Congress claimed a 0.5% fee and the BJP's Amit Malviya called the claim completely false. He is right. It is 0.4. Tell that to the man who has decided that the difference between 0.4 and 0.5 is only a matter of time. Everybody believes this is testing waters. You don't argue with belief in a country where you are expected to respect everyone's belief.

The cold press release will not warm anybody. NPCI FAQs do not go viral on WhatsApp. "UPI par tax lag gaya" travels at the speed of UPI itself, with zero MDR. And the UP election is not a decade away, it is a winter away. The party that won that state on the emotion of demonetisation is now walking into it on the emotion of monetisation.

This applies to a tiny fraction of total UPI transactions and Jugaad India will find a way out of even that, rest assured. Either way, the fee is peanuts. Losing face for peanuts is nuts. Anything that costs just one paisa can be made free to everybody's joy. Anything that is free, pricing it at even one paisa sounds like robbery. As the eminent philosopher of our times, Shri Samay Raina, once said: A non-vegetarian can eat veg, but a vegetarian can't eat non-veg. Free UPI is a small price to pay for a paid UPI that makes you pay dearly.