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How to Start Petrol Pump in India

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Introduction: Petrol Pump in India

Petrol pump business is considered a highly profitable business in the whole world. This is largely due to the transportation and logistics sector's ever-increasing growth and resulting demands. Another obvious cause is the rising demands of the average person's daily commute. Furthermore, in today's world, owning a vehicle is nearly a need for a middle-class individual to secure his comfort and convenience in day-to-day living.

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As a result, starting your own fuel pump business is a viable alternative in today's world. Furthermore, Oil Marketing Companies (OMCs) want to create more feasible prospects in order to support the growth of the petrol pump sector in India in 2020-2021.

The procedure and formalities for opening a petrol pump business in India is as follows:

Eligibility Criteria for Opening a Petrol Pump in India

  • The proprietors of the petrol station should be Indian citizens. An NRI applicant must have spent at least 182 days in India before applying.
  • The applicant's minimum age limit is 21 years, and their maximum age limit is 55 years.
  • A copy of your birth certificate is necessary.
  • A person living in rural areas must have a minimum educational qualification of 10+2. Individuals living in urban areas should have a university degree from a university recognized by the UGC as the minimum educational qualification. A 10th-grade certificate is required for CC1 applicants, and a 10 +2 certificate is required for CC2 applicants.
  • Applicants who fall within the category of freedom fighters are exempt from the rules.
  • A minimum investment of Rs 15 lakh or more is necessary in rural regions to obtain a dealership.
  • To obtain a dealership in urban regions, you must invest at least Rs 2 crore.
  • The company location selected should not be in an excluded or blacklisted zone.

Read Our Blog: Petrol Pump License Eligibility

Land Requirement

The location of gas pumps, like mobile towers, must be determined by a study of the petroleum companies. These gasoline firms frequently advertise sanctioned land locations, so make sure your chosen land area comes into that category before submitting your application. You must also ensure that you meet the following land requirements:

  • You must own or lease the land for the time period agreed upon by the oil dealership.
  • For the verification procedure, make sure all of the land's legal documents are in order.
  • The required land space should be between 800 and 2000 square meters, depending on the location.
  • The site selected should be built, leveled, and conveniently accessible from the road.

Investment and Fees

To start a petrol station business, you'll need a good investment capacity. In India, there are two sorts of fees for opening petrol stations:

  • Rs 12 lakhs for rural ROs and Rs 25 lakhs for urban ROs, while the exact value varies from company to company.
  • Your funds will be acceptable in the below modes:
  1. National Savings Certificates
  2. Bonds
  3. Shares of listed Companies in Demat Form
  4. Mutual funds
  5. Saving account funds
  6. Bank deposits
  • Cash, jewelry, and current account balances are not acceptable forms of investment in this company.

Application for License

The next step is to secure a permit to operate a gas station. Oil Marketing Companies (OMCs) advertise for petrol pumps to be installed in various locations on their official website or in the media. Candidates must meet the following requirements:

  • Purchase a form for Rs 100 (rural areas) or Rs 1000 (urban areas) online, complete it with accurate information such as personal identification, mark sheets, and land information, and upload the relevant documents to the oil company's website.
  • After receiving the license, the applicant must receive a GSTIN number in order to pay GST and register a current account in the name of his petrol station.

Obtaining Certificates

Once the license is sanctioned, the next step will be to obtain certain certificates and permissions before building the petrol pump infrastructure:

  • Permission from the Municipal Corporation and Fire Safety Office is required for obtaining all the certificates and permissions for the petrol pump.
  • Applicant must have the NOC from the licensing and other concerned authorities.
  • Location Certificate is also an essential document for starting a petrol pump in India.

All Expenses and Investment in Petrol Pump Business in India

The total investment required for the petrol pump business is between Rs. 50 and Rs. 60 lakh in rural areas and up to Rs. 2 crores in urban areas. The following is a list of the business's expenses.

  • Land: Land is the first source of concern. There will be no explicit cost added to the expense if the owner owns the land. Lands that are leased will have a one-time payment.
  • Machines: Each pump should have at least two machines, one for diesel and the other for gasoline. Each of these machines costs around Rs. 10 lakh. As a result, the machine installation will cost Rs 20 Lac.
  • The sales room: Every pump must have a salesroom. That needs to be done correctly. The expense of establishing a moderate salesroom is around Rs. 10 lakh.
  • Canopy and driveway: Each of these will require 10 lac. That's $20,000 for the canopy and at least 700 square meters of driveway space in the petrol station.
  • Underground Tank: Finally, underground tanks will cost approximately $5,000. The entire cost of two tanks (one for gasoline and one for diesel) will be around ten thousand dollars.
  • Additional costs: Documents, license fees, and other retail costs must be factored in. These costs are determined by factors such as authority, location, and so on.

Dealer's Commission on Petrol

According to the current report, dealers receive Rs. 2.58 per liter from petrol station owners. The tariff for diesel, on the other hand, is Rs. 2.60 per liter. This amount is provided as a commission by the majority of the major fuel firms.

Petrol pump owners receive Rs. 202.38/- per KL (kilolitre) plus an additional 0.89 percent on the retail price of gasoline. This commission is based on the price of gasoline. The commission rate for diesel is Rs. 1502.13 plus an additional 0.27 percent of the retail price.

  • Most people believe that gas station businesses make a lot of money. It is partially correct in certain ways. The company generates a substantial amount of revenue. However, the expense of doing business is also considerable. As a result, the profit margin is not as large as it appears. The profit margin for a typical gasoline station is around 1.8 percent. It means that selling 1 liter of petrol generates a profit margin of Rs. 1.8.
  • Assume a pump sells 400 liters of fuel and earns ten thousand dollars. He will have to spend about Rs. 6 Lac on production costs. Wages, maintenance, electricity, interest, and other costs total around $6,000. The remainder will be the profit before taxes.
  • After deducting the tax, the net profit shows Rs. 2-2.5 Lac per month is Rs. 24 to 30 Lac per annum.

Why you should invest in the petrol pump business:

The growing economy and population increase are the primary drivers of rising oil and gas demand.

The government plans to double the gas pipeline network in the next five years, from over 19,000 km in in 2021.

India is one of the world's fastest-growing consumers of energy. After China and the United States, it is the world's third-largest consumer. On June 28, 2017, the Directorate General of Hydrocarbons (DGH) established the National Data Repository (NDR) to make all Exploration and Production (E&P) data public. This is mostly for commercial, research, and development, as well as academic purposes.

  • National Gas Grid: India aims to become a gas-based economy by increasing natural gas's part in the country's primary energy mix from 6.2 percent to 15%. Under the Pradhan Mantri Urja (energy) Ganga scheme, the government has granted a capital grant of INR 5,176 crore to supply clean energy in the country's east.
  • As of 30.11.2020, OMCs had supplied 1413.38 lakh refills to PMUY beneficiaries under this Scheme, with over 7.5 million PMUY beneficiaries receiving free cylinders.
  • Government Supportive Regime — Ease of Doing Business has been shifted to industry-specific policy HELP (Hydrocarbon Exploration & Licensing Policy). Among the benefits of the Policy include a single license for exploration and production of conventional and nonconventional hydrocarbon resources, pricing and marketing freedom, and a lower royalty rate for offshore blocks.
  • Since FY 2001-02, India has been a net exporter of petroleum products and the largest exporter of petroleum products in Asia since August 2009.

The National Gas Hydrate Project-2 has discovered two world-class gas hydrate reserves (NGHP-2). This has created new opportunities for alternate energy sources.

Upstream options include gas pipelines, city gas distribution networks (CGD), LNG terminals, underground coal gasification, coal to liquids, petrochemicals, and refineries.

To keep oil prices in check, India has decided to release 5 million barrels of crude oil from its Strategic Petroleum Reserves.

Schemes by govt. of India:

  • Union Budget 2022-23: The Ministry of Petroleum and Natural Gas has received a total budgetary allocation of INR 8,939.86 crore for FY 2022-23.
  • The Oil Industry Development Board, founded under the Oil Industry (Development) Act, 1974, provides financial assistance to the Indian oil industry, including loans and grants.
  • In addition to tax incentives, the National Policy on Biofuels 2018 mentions a viability gap finance scheme of INR 5000 crore for 2G ethanol Biorefineries.
  • The Indian government has established a policy framework to boost oil and gas production methods and techniques such as Enhanced Recovery (ER), Improved Recovery (IR), and Unconventional Hydrocarbon (UHC). The framework includes financial incentives such as partial royalty and cess waivers.
  • The Department of Food & Public Distribution has introduced a Scheme to provide financial support to sugar mills for the upgrading and expansion of ethanol production capacity. The scheme aims to inject INR 1,332 crore via the Interest Subvention route.
  • The government is implementing the Ethanol Blended Fuel (EBP) program through Oil Marketing Companies (OMCs), which offer ethanol-blended petrol with a concentration of ethanol up to 10%. To help fund this endeavor, the government has decreased the GST rate on ethanol used in the EBP program from 18 percent to 5%.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.

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Author
Surbhit Sharma
I have worked for many internet blog pages and news portals. currently, I am working as a content writer for Corpseed Pvt. Ltd. I like to write blogs and articles in the field of different services.

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