Petrol and diesel will cost 0.75 per cent less if purchased using cards or e-wallets from state-run companies. "4.5 crore consumers buy petrol and diesel worth Rs 1,800 crore daily and in one month, digital payments have doubled to 40 per cent," Mr Jaitley said.

The Finance Minister said central government run organisations and public sector units or PSUs will not charge transaction fees on digital payments.

He also announced discounts on insurance products purchased online - 10 percent on general insurance, eight per cent on life insurance.

Mr Jaitley said one lakh villages in India whose population is about 10,000 will be given two Point of Sale or swipe machines each to encourage digital transactions. The government is focused on addressing rural distress amid the cash crunch that has followed the notes ban.

Railways passengers have been encouraged to go cashless with a 0.5 per cent discount on monthly and seasonal tickets for suburban railway networks. The railways will also give a 5 per cent discount for services like catering and use of waiting rooms, if purchased digitally.

Railway passengers who make digital payments will also get an accident insurance cover of Rs 10 lakh, the Finance Minister said.

People who pay digitally or use prepaid cards will get a 10 per cent discount at toll plazas on highways.

The government's aim, Mr Jaitley said, was to reduce the use of cash as the economy bears both "visible and invisible" transaction costs for these. "So we are using this opportunity to move towards digitisation," the minister said, adding that the cost for this would be borne by the central government and the PSUs participating.

On Thursday morning, the government had announced that people would not be charged service tax when they use their credit or debit card for up to Rs 2,000. Currently, a 15% tax is imposed on these transactions.