How to Start a Petrol Pump Dealership in India?

A petrol pump dealership is a highly sought-after business in India. The automobile sector is growing at a breakneck speed over the past few years, and the road network is expanding with significant quality improvements. As a result of these two factors, petrol consumption (also diesel consumption) is rising in India, signalling the need for more retail outlets. But, how can you get into this prized business option?

Opening a petrol pump in India

An entry into the retail trade of petroleum products is different from that of most businesses. First, you have to wait for the opportunity even if you have all the resources (capital, land, and support). Then, only when the Oil Marketing Companies (OMCs) decide to open a pump in your preferred location/s, your effort begins.

To keep the selection process transparent, the OMC has formulated a standard eligibility-based online strategy. In this structured process, only those applicants who clear the eligibility criteria of the first stage qualify for the next round.

Apart from various sub-categories, the petrol retail outlets are of two types:

• Oil company-owned, dealer-operated
• Dealer-owned, dealer-operated

With its various clauses, sub-clauses, and conditions on eligibility, reservations, land ownership, and more, the application process requires careful study before you decide to apply. As the first step in preparation, you may consult the specially designed website for petrol pump dealership applications.

The actual process of your application starts once the petrol pump dealership advertisements inviting applications are released.

In this article, we take a brief look at some of the salient features of the application process. For a detailed understanding, it is best to study the application brochure of the OMCs.

1. Location of the outlet

A petrol pump outlet’s location is a critical parameter and is decided by the OMC concerned. In general, the outlets are of two types:

• Regular retail outlet, located within the municipal limits of urban or semi-urban areas and on national or state highways
• Rural outlets outside the municipal limits of a town and in rural areas, but not on a highway

Land for the proposed outlet is a significant parameter. Applicants are classified into three groups as per the status of land ownership:

• Applicants have a requisite parcel of land in the advertised area by way of ownership or a long-term lease for a minimum of 19 years 11 months (or as specified in the advertisement)
• Applicants having a firm offer for the purchase or long-term lease (19 years 11months) for land
• Applicants who have not offered land

The size of the land parcel is area or outlet-specific and will be indicated in the petrol pump dealership advertisement.

2. Eligibility requirements

• Citizenship: Only for Indian citizens
• Residential status: Residents of India as defined under the Income Tax Act, minimum stay of 182 days in India in the previous financial year of the application
• Age: The applicant must be above 21 years and below 55 years except for freedom fighters under the reserved category.

The documents accepted in support of age are a Standard X-level board certificate, passport, affidavit for age, or voter ID card.

3. Educational qualifications

• For rural outlets:  10th standard pass
• For regular (urban) outlets:  Graduation/professional qualifications for General category; 12th standard pass for others

4. Reservation

These are the percentages of reservations for various categories for allotment of regular/rural petrol pump dealerships in all states except Arunachal Pradesh, Meghalaya, Nagaland, and Mizoram.

These are the category-wise allotment percentages for regular and rural petrol pump dealerships in Arunachal Pradesh, Meghalaya, Nagaland, and Mizoram:

5. Facilities required at petrol pump dealership outlets

1. Infrastructure
2. Developed land with boundary wall as per the design and specification of the OMC with a driveway and a canopy
3. Storage tanks, dispensing units, signages
4. Yard lighting, electrical room, water connection, toilet, office room, storeroom, compressor with electronic gauge for air filling
5. Fire and safety equipment
6. Necessary equipment to be installed at the petrol pump outlet as per the statutory requirements
7. Trained staff to be available for 24x7 operation

8. Customer conveniences

Drinking water, toilet, first-aid kits

9. Additional facilities

Site-specific requirements like staff restrooms, retail shops, and restaurants may be intimated by the company

10. Full-time occupation

Oil companies expect the petrol pump dealership awardees to be managing the retail outlets full time. In case someone is employed, they have to submit a letter of acceptance of resignation by the employer before an LOI is issued.

Steps to open petrol pump dealership in India

1. Register on the portal and follow the OTP-based procedure. Fill in the form.
2. Log in. Choose the Available Advertisement option. This page will display all the state-wise ads for inviting dealerships of retail outlets.
3. Select the particular advertisement. Click on the button for the specific location. Fill in the application form.
4. You can save your application temporarily and edit it at any time. In that case, you need to select Applied Advertisement after logging in to the portal.
5. Hit the button, submit. and proceed to pay.
6. Click on the Pay Online button.

After a successful payment, a receipt will reach you through email.

6. Selection procedure

Depending on the type of petrol pump outlet, the authorities will select either through a draw of lots or a bidding process.

Finally, the selected candidates will be asked to submit documents for land evaluation and field verification of credentials. They must pay 10% of the total security deposit at this stage.

The examination of documents will take place after receipt of the partial deposit amount. Upon successful verification, the authorities will issue the LOI.

7. Investments

The investments will depend on the location of the petrol pump outlet and the additional facilities offered. A ballpark estimate is Rs. 2 crores in urban areas and Rs. 50 lakhs in a rural location.

• Fees and Deposits (part of total investments)                                  
• Interest-free, refundable security deposit:

1. Regular outlets – General: Rs. 5 lakhs; OBC: Rs. 4 lakhs; SC/ST: Rs. 3 lakhs
2. Rural outlets – General: Rs. 4 lakhs; OBC: Rs. 3 lakhs; SC/ST: Rs. 2 lakhs

• Fixed, non-refundable fee or bidding amount:

1. For dealer-owned sites – Rs. 5 lakhs for rural outlets and Rs. 15 lakhs for regular outlets.
2. For company-owned sites involving bidding allotment – Minimum Rs. 10 lakhs for rural outlets and Rs. 30 lakhs for regular outlets.

Conclusion

People in business consider the allotment letter for a petrol pump dealership a prized possession.  But like any other business, managing a petroleum retail outlet, too, has its challenges. Again, it is your insight, strategy, and efforts that will lead to success.

An arduous selection process, from the application to the final allotment, perhaps prepares you for the challenges of running a petrol pump.

Also read:

1) How To Start A Petrol Pump Business In India?
2) How to start a car dealership? Here's what might interest you
3) How to Get Bike Dealership In India? Two Wheeler Dealership Guide!
4) How To Get An Electric Vehicles Dealership? A Complete Guide!
5) OkCredit: All you need to know about OkCredit & how it works.

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FAQs

Q. Is a petrol dealership profitable in India?

Ans. The vast number of applications against allotment of each outlet is an indication by itself of the possibility of petrol pump dealership profits. In this business, you earn a fixed margin on your sales, and your selling area is restricted or location-dependent. It is estimated that most pumps sell over 2 lakh litres of petrol and 1.5 lakh litres of diesel.

At the current level of commission, these volumes generate excellent profits for the petrol pump dealership, after all, other expenses. Many petrol pump outlets have created additional revenue points like food joints, vehicle repair facilities, and more.

Q. Is it possible to choose a particular oil company for a dealership in a given area?

Ans. The dealership is offered only against location-specific petrol pump advertisements by different OMCs. You can choose a particular company if the offered location suits you. But since OMCs jointly operate the entire system of dealer appointments, it is unlikely that requirements will overlap in any given area and you get to choose a particular company.

Q. How can you submit an effective application for a petrol pump dealership?

Ans. Following these few salient points can help you make an effective application for a petrol pump dealership:

• Study and understand the application process and the requirements.
• Organise the documents, particularly for eligibility and land. Check for any inconsistencies.
• Review your finances since the monetary involvement is high. Ensure that you can arrange the fees or deposit within the permissible time if you get an allotment.