Procedure To Open A Petrol Pump in India – Dealership Profit & Investment

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Petrol Pump owners have always been in a good profit as it offers them to have great business opportunity. With the never ending demand in recent future, going for a petrol pump owning business one can get returns to multiple folds. Though getting license for a petrol pump isn’t an easy job. There are various procedures that are needed to be followed. Here is the whole details mentioned for opening up a petrol pump in India. In this article, I am going to share information on how you can open a petrol pump, how to get license and what are various eligibility criteria for starting a petrol pump station in India.

Eligibility Criteria for Opening Up a Petrol Pump

The Indian Government has setup rules regarding ownership of petrol pumps. Here are some clauses of the rule book:

  • The owner of the petrol pump should be an individual who is an Indian citizen.
  • The minimum age limit for an applicant must be 21 years and maximum should be 55 years.
  • Educational qualification is must is you want an ownership of petrol pumps. For rural petrol pump owners a minimum of 10+2 certificate is required. For regular a university degree certificate is required. The university must be recognized by UGC. For candidates belonging to CC1 category, a 10th certificate is enough and for CC2 category a 10+2 certificate is required.
  • The rule is not applicable for those who come under freedom fighter category.

Requirement of Land

Similar to mobile tower installation, petrol pumps are also located based on analytics of the petrol companies. The petrol companies issue advertisements on various land location and if your land falls into that zone you can apply for the ownership. The land should either be owned by you or it should be leased for the period mentioned by the oil dealership. You need to have all the required legal documents ready in order to get it verified. The land space required should be in between 800 sq. meters to 2000 sq. meters depending on the location whether rural or main. Land should be close to the road, leveled and developed.

Fees for Owning License

There are two rates. First one that is Rs 12 lakhs is for rural ROs and Rs 25 lakhs for regular ROs. The difference between a rural and regular RO is that a rural RO can be away from highways or ideal location while a regular RO should be in the main location near the road or highway. The money above mentioned should be in NSCs, saving schemes, bank accounts, shares, mutual funds or bonds. Only 60% of the total value will be evaluated in case of share or bond. Funds that are invested as cash, jewelry, and current account balance will not be counted as fund.

Note: Fees amount varies from companies to companies, above given amount is a estimation.

Application Process and Thereof

The process of application is quite transparent and so is the selection or allotment. You need to fill a form that costs Rs 100 for rural ROs and Rs 1000 for regular ROs. You can fill the form online based on whichever oil company you want a dealership with. Based on their criteria if they find you as ideal choice they will contact you. Correct information should be filled regarding your identity, mark sheet, other valid documents required, land details and documents, etc.

Later on Requirements and Expense

After you get the dealership from the oil company you should start to build the petrol pump and the required infrastructure. You will first need to get a series of certificates and permissions for opening a petrol pump. Few of them are:

  • Permission from the Municipal Corporation
  • Permission from the Fire Safety Office
  • NOC from the licensing authority
  • Certified copy of your location for right of way
  • Certification and NOC from the concerned authorities

The construction of petrol pump will also require some fund. There need to be fitted underground tank based on the standards to store the oil. Adding other required equipment and accessories and employing technicians, accountants and staff will cost you around 30 to 50 lakhs in minimum. One should make a budget around Rs 1 to 2 crore. The cost of land remains volatile therefore should be counted as such.

Some other Expense

Here is a detailed explanation of other expense and profit. Suppose you are selling X liters of petrol and Y liters of diesel per month. Then you need to first buy it from the dealership company. You will have to pay the desired amount and what you will get as a return will be your commission. One needs to understand here is unlike any other business, a petrol pump owner is basically an employee who only gets a commission instead of salary. Then you will have to pay up for the transport of oil to your location in addition to loss of petrol while transporting. You will also have to pay lease to the oil dealership and if you have leased the land then you may also have to pay it to the original owner of the land.

The next expense is salaries for your employees, electricity charge, other types of charges, tax on sale, maintaining safety measures, etc. Only after reducing these expenses from the gross earning per month you can get the original profit which will depend on the sale per day.

Reservation for Applicants and Special Benefits

The Ministry of Petroleum under the Government of India provides reservation in providing petrol pump dealership to the applicants. The SC/ST quota applicants get 25% reservation while the physically handicapped applicants get 5% of reservation. Government personnel, police or paramilitary applicants get a reservation of 8% while the same percentage reservation is given to defense personnel. Freedom fighters and outstanding achievers in sports get 2-2% reservation respectively. The remaining 50% of seat is available in open class where anyone can apply based on the criteria.

Some Questions and Answers Regarding Petrol Pump Dealership:

Q: How Can I Get a Petrol Pump Dealership?

Answer: You need apply for the dealership to the respected oil companies based on the advertisement. Your land should fall on the location marked by the companies. You need to apply with all required documents with sufficient money. The method of selection is transparent and 50% reservation is allotted to the special section.

Q: How Much Investment is required?

Answer: A minimum investment of 1 crore rupees should be estimated which can further escalate to 2-5 crore rupees. The cost mainly depends on the land price which depends from place to place. The core cost that is covered in licensing and other related cost is around 15-50 lakh rupees. One can add the cost of construction, employees, and other such expenses.

Q: Is it a Profitable Business?

Answer: Yes, one of the most profitable business is that of petrol pump. The requirement of petrol is not going to decrease anytime soon therefore your sale is definitely going to happen. What makes the difference is the location of your pump and the number of customers you get. If your pump is located near the main city then you will get huge customers while in case of highways the traffic may go down yet it will be constant and profitable.

Petrol Pump dealership is a profiteering business but it definitely requires a lot of hard work and manpower which is quite exhausting. If you can survive that then you should definitely go for it.

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