Digital Public Infrastructure should be priced as a public good. Discuss in the Indian context.

Digital Public Infrastructure (DPI) means open, shared digital systems such as Aadhaar and UPI. It works like a road network: the more people use it, the more useful it becomes. India has treated UPI as a public good by charging zero Merchant Discount Rate (MDR) on Person-to-Merchant (P2M) payments since January 2020 [2]. A September 2026 notification imposes a 0.4% MDR on P2M payments above ₹2,000, and the Supreme Court has now questioned it [1]. That has reopened the debate on how DPI should be priced.

Case for public-good pricing

• Network effects: Free use speeds up adoption by small merchants and first-time users, which deepens financial inclusion. The Centre's 0.15% incentive on small-merchant payments up to ₹2,000 aimed at exactly this [3].
• Formalisation: Every digital payment leaves a trail. A charge gives merchants a reason to ask for cash, which could revive black money, as the petitioner argues [1].
• Positive externalities: The benefits, such as a wider tax base, credit histories and better welfare delivery, go to society as a whole and not only to the user.
• Trust: In 2025 the Government called claims of GST on UPI payments above ₹2,000 "completely false" [2]. A sudden charge on those same payments weakens public confidence.

Case against purely free pricing

• Operating cost: Under zero MDR, banks and payment apps earn nothing from merchant fees. The Budget bore ₹1,500 crore in FY 2024-25 alone [3].
• Investment and resilience: RBI's 2022 Discussion Paper said charges should be "reasonable" but should still give intermediaries an "optimal revenue stream" [4]. Keeping the system running reliably and controlling fraud both cost money.
• Equity: Taxpayers end up subsidising large merchants who can afford a fee.

Way forward: calibrated pricing

• Tiered model: Keep small-ticket and small-merchant payments free, and charge large merchants a modest, capped fee.
• Rule of law: Zero MDR was set by a CBDT gazette notification under the Income-tax Act [2]. Any levy should rest on clear legal authority from Parliament, as Art. 265 and Art. 300A require. This answers the Court's "tax or fee?" question [1].
• Consultation: Publish cost data and consult merchants, banks and apps first, as RBI did in 2022 [4].

DPI is best treated as a public good at its base and a priced service at its upper tiers. A pricing model that is set by law and informed by evidence would keep UPI both universal and financially viable. It would also serve the Constitution's promise of economic justice and SDG 8's goal of wider access to financial services.