Do you want to start a fuel station or petrol pump business in India? Are you looking for a dealership opportunity for Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL), Indian Oil (IOCL), Essar Oil, or any other oil company? The object of crafting this article is to provide a detailed guide about how to start a petrol pump business in India.
The petrol pump is a traditional business in India. And the business is also a lucrative venture for small business entrepreneurs. Additionally, the business offers sustained cash at little risk along with some prestige.
However, nowadays the business model has changed to a certain extent. And a fuel station offers other value-added services to the consumers. However, the business entirely depends on the local demographics.
Is Petrol Pump a Profitable Business in India?
The profit margin is low for petrol pump dealers in India. However, as the volume of sales is high, dealers make good money out of the petrol pump business.
On average, dealers get a commission of Rs. 3 per liter of petrol and Rs. 2 per liter of diesel. With good location and proper planning, a petrol pump dealer can make more than Rs. 5 Lakhs per month easily
Petrol Pump Business Plan Guide for Beginners
We must say, starting a petrol pump is not at all an easy task. It requires a prominent location with sufficient space for operation. Additionally, there are several conditions that you must comply with. Let’s Check out:
1. Eligibility Criteria to Start a Petrol Pump in India
a) Land requirement: First of all, you must have a sufficient area of land in a prominent location. Generally, all the petrochemical companies publish advertisements in the leading newspapers as well as on their website. So you must ensure a suitable piece of land in the area mentioned in the advertisement. You may either own it or have it on the long-term lease for a minimum time period as mentioned in the notification.
Generally, the land area required to start a petrol pump in India is in the range of 800 square meters to 1200 square meters.
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b) Proof of Citizenship: You must be an Indian citizen and a resident of India as per the Income Tax rule. To be considered as an Indian resident, an individual should have stayed in India for 182 days or more in the last financial year.
c) Proof of Age: You must have an age between 21-60 years. However, a Freedom Fighter under the CC2 category can apply for a license beyond this age limit.
d) Educational Qualification: You must have an educational qualification for rural ROs in the 10+2 examination conducted by a Board/University and Graduation/ Chartered Accountant/ Company Secretary/ Cost Accountant/ Diploma in Engineering for regular ROs.
2. Cost of Starting a Petrol Pump in India
You must have a substantial investment capacity for this business. On an around, you will need to prepare with cash of Rs. 50-60 Lakh to start a petrol pump in India. You will need to show the ability of a minimum working capital of Rs 25 Lakh in the case of a normal pump and Rs 12 Lakh in the case of rural petrol pumps.
The fixed fee requirement for a regular petrol pump is Rs. 15 lakhs whereas for rural petrol pumps is Rs. 5 Lakhs
The following forms of investment are considered as eligible funds:
- Funds in the savings account or deposited in the bank or registered companies or postal schemes.
- National saving certificates and bonds.
- Shares of the listed companies from the Demat account.
- Mutual Fund investments.
However, the cash in hand and the jewelry are not valid propositions. Additionally, the current account balance will not be considered.
Generally, you will need to apply for the dealership with a nominal application fee. Application fees are Rs. 100 in the case of rural ROs and Rs. 1000 in the case of regular ROs. 50% concession is available for candidates belonging to SC/ ST.
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You will need to pay the application fee in the form of a Demand Draft (DD) of a scheduled bank drawn in favor of the concerned Oil Company. The fee is non-refundable. Additionally, one applicant cannot apply for more than one location. Moreover, one application for one applicant for one location.
The specific fee depends on the location and varies depending upon the oil company. Check the respective company website carefully before applying for the pump dealership.
3. Arrange Funds
The petrol pump business is a cash-intensive business. Most applicants looking to buy a petrol pump dealership will need funds to start and run a petrol pump.
One needs to develop a business project plan document from professional writers and submit it to banks and financial institutions. Check this article to learn more about the best business loans in India.
4. Register a Company
Experts suggest forming a private limited company to run a petrol pump business. This is because running a petrol pump is a big-ticket business activity and a big amount of financial transactions are expected.
At present, GST Registration is a must to run a petrol pump business in the country.
5. How To Apply For The Petrol Pump License in India
First of all, you will need to look out for the release of an open advertisement by the petroleum company. Generally, the companies publish the advertisements in all leading newspapers and on the official websites of the concerned company.
You can get the information from these advertisements or notifications about the location/s where the company proposes to set up a petrol pump. If you are interested, you can apply for the license for the opening petrol pump in the desired state/ city/ town/ area.
Below are the important website link for applying for the petrol pump license in India:
After getting the license you will need to establish the petrol pump and oil bunkers according to the company’s specifications.
Editorial Staff at NextWhatBusiness is a team of Business Consultants having years of experience in small and medium scale businesses.