Recent advertisements by the Oil Marketing Companies (OMCs) for over 50,000 new petrol pumps has led to a sense of insecurity among the existing petrol pump owners and they have demanded that the government should ensure welfare of existing petroleum dealers before granting permissions for new petrol pumps.
“The number of new petrol pumps that would be coming up as per the advertisements is almost the same as that of the existing number of petrol pumps across the country. That means the petrol distribution network will see an instantaneous growth of 100 per cent. However, the customer numbers is only growing by 4 to 8 percent. So, the new petrol pumps would essentially mean halving the business of the existing petrol pumps,” said Uday Lodh, president of the Consortium of Indian Petroleum Dealers, the apex body of the petroleum dealers in India. “The government needs to assure the existing petroleum dealers that their business will be protected. Also, considering the prevailing issues bothering the business, the government should also come out with some handholding measures for the survival of this business. Else it will be catastrophic,” he added.
'Government move seems unviable'
The government is acting on several fronts simultaneously. While, on one hand, efforts are being made to bring in more vehicles with newer fuels – which a minister said would lead to closure of petrol pumps by 2025; the other arm of the government is planning to open 55,649 new petrol pumps. Their premise is that it will give a boost to employment generation. But, it is ironical as well as misleading, Lodh said. “It took 70 years for the authorities and the business community to establish 56,000 pumps and now the MoPNG through OMCs has come out with 55,649 new pumps in a single go. I fear it is unviable,” he said.
Questioning the logic behind planning to open 55,649 petrol pumps in one go, Lodh also said that around 90,000 retail outlets across the country are not being able to sell requisite amount of petroleum products for being profitable. “There are 80,000 plus retail petrol pumps of OMCs and 9,000 plus ROs are owned by private companies. Their average monthly sales are 120 to 130 kiloliters while the benchmark for minimum profit is 170KL. This leads to 80 percent of dealers financially struggling,” Lodh said and added that the oil companies have not even devised any ‘exit policy’ for the petroleum dealers and that they have to somehow survive with such burdens.
Spending money on new retail outlets is not feasible
Lodh also raised the issue of huge public money being spent on the exercise. “OMC owned by the public will spend huge amounts of public money for setting up the new retail outlet, majority of which would go waste due to non-viability of business. Further lowering of average sales volume throughout the nation will not only affect the existing dealers but also new dealers who will be in trouble from the beginning,” he pointed out while saying that the fight for adequate margins of existing dealers is still on and unaddressed by the government and OMCs.
Lodh also pointed out that when the government or the OMCs approve new outlet, it is necessary to declare their economic viability report so that the decision would be a well informed one and not deceitful to a new businessman. Value of land, deposits, investments in the property all are rising very high, while the losses due to changing daily prices and compulsion of various expenses on dealers by OMCs, have made this business unaffordable in given current margins.
