Go Back   Team-BHP > BHP India > The Indian Car Scene


Reply
 
LinkBack Thread Tools Search this Thread
Old 30th May 2012, 01:06   #1
Newbie
 
Join Date: Dec 2006
Location: chandigarh
Posts: 19
Thanked: 216 Times
Thumbs up The Petrol Pump Story - How Petrol Pumps Operate

Some thoughts here about purchasing fuel. This is something that each one of you must know.

Fuel is one of the very few commodities that you buy without looking at what you are actually buying (in comparison to say cloth, groceries etc.) The pump attendant shoves the nozzle in your car; you see the metre reading go up, something happens and the nozzle is taken out. You pay and you drive away. It all works on trust.

But for each litre of fuel that you purchase, you eventually are dispensed much lesser than 1000ml.

Reason:

More Profits per litre >> YES!!

The Real Reason:

Detailed discussions with dealers have brought out some facts.

Most Indian Petrol Pumps have underground tanks of 20000 litre capacity. There could be a number of such tanks depending on the number of products on offer and the space available underneath the pump area. Fuel stocks are estimated using a dip stick. The dip stick is a stick made up of a non-corrosive material. It is put vertically into the tank and then pulled up. The fuel stock level is checked against the markings on the dip stick. Then a calibration table is referred to and an approximate stock in litres is calculated.

Tankers bringing in supplies are of typically 12000 litre capacity or 20000 litre capacity. Tankers can be of three types.

Company owned Oil Company driver and navigator
Contractor owner Tie-up with the company on fixed fee per trip basis
Private owned Owned by the pump operator/dealer

Now when a dealer realises that stocks have gone below 8000 litres, he/she places an indent at the appropriate company fuel depot (8k + 12k = 20k). Payment for the same is made via a Demand Draft. Approval of indent is possible only after the money transaction has taken place.

Now we shall look at a typical situation of a dealer operated pump using the company tankers:

Average sales of petrol (known as MS by oil companies) at an outlet are say 6000 litres. Dealer commission is say Rs. 1.5. What ideally should happen is:

DAY 1
Opening Stock 0
Petrol Supply 12000
Petrol Sales 6000
Balance Stock 6000
Dealer Commission 1.5
Dealer Income 9000

DAY 2
Opening Stock 6000
Petrol Supply 0
Petrol Sales 6000
Balance Stock 0
Dealer Commission 1.5
Dealer Income 9000

Total income = Rs. 18000 for 2 days. Assuming only one product on sale, we can say Rs. 270000 in a month.

Coming back to the product now. We are all aware that fuel is a volatile product. Slightest increase in ambient temperatures will cause it to evaporate.

The temperatures at which tankers are filled at the refinery or the depot are quite high. A lot of evaporation takes place there. In addition to that, the company itself does not give out complete 12000 litres (Yes, this might come across as a joke but no when the delivery invoice says 12000 litres you easily take it as 11900 litres possibly a way to recover losses)

Temperatures in summers range from 35 to 50 degrees in various parts of the country. The fuel is put in the tankers and these tankers travel a minimum of 50kms under the hot sun leading to another 50 or so litres getting evaporated.

The tanker is decanted and most tanker drivers have ways of taking at least 20-30 litres back with them to sell elsewhere. (The tanker looks empty but there is fuel remaining). The dip stick cannot tell you variations in the range of a few hundred litres and you feel all is well. You even tip the tanker driver. (Cannot disclose amount here but it is a few hundred rupees)

Now the product is in the underground tank and extreme temperatures outside cause further evaporation. Another 100 litres lost over one operating cycle.

Ultimately, a rough estimate suggests that for every 12000 litres that was billed to the dealer, he/she eventually sells only 11730 litres. A loss of 270 litres in each operating cycle. A loss of 135 litres a day and eventually a loss up to 4050 litres every month purely due to short supply and evaporation.

Now comes the next blow. Company guidelines say that a variance of 0.6 percent of sales is permitted which for our example works out to be 36 litres a day and eventually 1080 litres a month.
The balance 99 litres (say 100 litres) needs to be adjusted for. The dealer has to operate like this in order to prevent going into losses.

DAY 1
Opening Stock 0
Petrol Supply 11730
Petrol Sales 6000
Actual Sales (978ml
against 1000ml) 5865
Balance Stock 5865
Dealer Commission 1.5
Dealer Income 9000

DAY 2
Opening Stock 5865
Petrol Supply 0
Petrol Sales 6000
Actual Sales (978ml
against 1000ml) 5865
Balance Stock 0
Dealer Commission 1.5
Dealer Income 9000


But in this exercise, you as the customer, lose out on 22 ml per litre. Which amounts to more than half a litre each time you get the car topped up (22ml x 30 ltrs = 0.66 litres = Rs. 45)

The most reputed pump or your most trusted pump dealer is giving you 978ml instead of 1000ml and he is doing this only to save his business. The unscrupulous ones are operating in the range of 900 to 950ml.

Expenses:

Now coming to expenses.

Operating expenses include electricity, manpower, maintenance and tips to the tanker driver and hafta to the government authorities. A minimum number of employees is required to be employed by the dealer per shift. Most good pumps pay handsome wages to competent employees in order to provide a high quality of service to the customer.

In addition, the sales tax is to be paid by the dealer per litre of fuel sold.

All these expenses amount to close to a rupee in itself. The dealer is left with 50 paisa per litre. Which eventually by our calculation gives him 6000 x 0.5 x 30 = Rs. 90000/month for working typically 18 to 24 hours a day, 7 days a week, no holidays.

30 percent of this amount goes towards income tax, so the dealer is left with approximately Rs. 60-65000/month only while operating this highly risky business venture.

Conclusion:

What I am trying to stay here is that the whole idea is to somehow create more volumes of the product. Product which does not exist, but is being shown in the books of record as sold. Costs can be cut by not employing adequate manpower, not using all dispensing units. Income can be increased by dispensing less.

One final word of advice. Please Please Please do not start fighting with your neighbourhood petrol pump dealer after reading this post. He/She is already under tremendous pressure from the company and there are no margins for errors. There is no end to greed but if you trust a particular pump, continue visiting the same place.

P.S. I have reported all the facts as they were told to me. Calculations are indicative.
aplang1 is offline   (161) Thanks Reply With Quote

Old 30th May 2012, 07:08   #2
BHPian
 
vikrantj's Avatar
 
Join Date: Jul 2009
Location: Pune
Posts: 528
Thanked: 240 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Pressure or no pressure there no reason why a customer has to be shortchanged.
I pay for 1 litre I should get 1000ml and not a ml less than that.

I may be wrong here but the tone of this article approves the pump owners shortchanging of customers.
vikrantj is online now   (3) Thanks Reply With Quote
Old 30th May 2012, 07:33   #3
Senior - BHPian
 
libranof1987's Avatar
 
Join Date: Sep 2010
Location: All over!
Posts: 2,687
Thanked: 882 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Thanks for sharing. And thank you for reporting facts honestly.

Though what I take from it - nobody is fooled as handsomely as the ultimate customer! (Please don't take this personally)
libranof1987 is offline   Reply With Quote
Old 30th May 2012, 07:59   #4
Distinguished - BHPian
 
CrAzY dRiVeR's Avatar
 
Join Date: Jun 2006
Location: BLR/ TVM/ CHN
Posts: 5,197
Thanked: 1,805 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

aplang1: Very well written article, and a fresh perspective to start a day with! Sadly - its us, the customers, who end up paying for the overall loses and corruption prevailing in the industry.
Quote:
Originally Posted by aplang1;
Please Please Please do not start fighting with your neighbourhood petrol pump dealer after reading this post. He/She is already under tremendous pressure from the company and there are no margins for errors.
Quote:
Originally Posted by vikrantj View Post
I may be wrong here but the tone of this article approves the pump owners shortchanging of customers.
I feel the tone of the articles says there is a lot more wrong in the system that just greedy fuel pump owners (Only that it deviates at the end, by asking us not to fight with the pump owners). Afterall - how many times have we accused fuel bunk owners only without thinking deeper into the situation? The article says how the whole system (From the company who sends less, to the government who takes the bribe, to the transporter who steals, to the unscrupulous dealers who steals much more) works so perfectly to loot us of our hard earned money.

Ideally - yes, when we pay for 1L - we should be getting nothing less than 1000ml. Afterall - if petrol costs Rs 77 and we got only such reduced quantities - the real cost of petrol is around Rs 80 per litre! Isn't it like paying a bribe for every litre of petrol? And yes - why should we not fight with the fuel pumps? He is the one who interacts with the end customer! Sadly - as the article mentions - there is no use fighting with the petrol pump only - the corruption infiltrates through many levels - and petrol/ diesel has such a heavy demand that a hundred people fighting against few petrol pumps (alone) wont impact anything in such a system.

But aplang1: If we are forced to pay Rs.1000 as bribe to any official, will it help if the bribe goes only to his pocket, or distributed to all the officials in that office? No. Hence, as customers - we can only fight with the petrol pump owners for getting what we are paying for! Its his job to ensure he gets the quantity he is paying for! If he doesn't ensure that, why should the end customer suffer?

If every customer (could) ensures the quality and quantity of fuel that he gets, such a system would not have evolved now, would it? The pump owners would have protested to the transporters, the transporters would have protested to the company and so forth. If only the 'sunfilm guy' could have raised a PIL for something useful like this!

PS - I dont know any fuel pump owners to get such detailed info, but I do know some within a larger circle - and I dont see them struggling to maintain their wealth. Infact - they seem to be enjoying the income!

Last edited by CrAzY dRiVeR : 30th May 2012 at 08:27.
CrAzY dRiVeR is offline   (2) Thanks Reply With Quote
Old 30th May 2012, 08:01   #5
BHPian
 
PatchyBoy's Avatar
 
Join Date: Nov 2007
Location: Bangalore / Memphis, TN
Posts: 593
Thanked: 304 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

By your own calculations, lets us assume that only 11730 lts are supplied against 12000 lts.

Average sales per day = 11730 / 2 = 5865 lts.
Average sales per month = 5865*30 = 175950 lts.
Dealear Comission = 175950 * 1.5 = Rs. 2,63,925.00
Expenses = Rs. 1.75,950.00
Profit = Rs. 87,975.00
Tax @ 30% = Rs. 26,392.50.00
Take Home = Rs. 61582.50

Using your own example, the profit is Rs. 61582.50, by giving the customer 1000 ml per lt.

By giving 978 ml the profit, as per your calculations is Rs. 63,000.00

I do not see where the loss is. This my friend is cheating the unsuspecting customer to increase profits and not for staying in business. Loss of fuel due to evaporation is part and parcel of the business and is already factored in. Even if you gave the customer 1000 ml to the litre, the customer also subsequently loses some fuel due to this evaporation, doesn't he?

Every business has its own risks and rewards. Short-changing an unsuspecting customer is not acceptable, no matter what. Also, are you communicating that even the most trusted vendor recalibrates his meter to dipense 978 ml to the litre?

Rajan
PatchyBoy is offline   (15) Thanks Reply With Quote
Old 30th May 2012, 08:04   #6
BHPian
 
bullboy's Avatar
 
Join Date: Sep 2006
Location: Trivandrum
Posts: 568
Thanked: 30 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Thanks for sharing.
But despite all these facts many people are willing to start new fuel pumps.If the profits are only like what you said i dont think people will be interested . Many of the pumps have land in the prime location ( by main road side ) they easily can do other business than this or simply leasing or rent out the land will give more income.
So i believe either the customer is fooled more, may be by dispensing less than that mentioned here or they have more income for liter of fuel sold
bullboy is offline   (2) Thanks Reply With Quote
Old 30th May 2012, 08:33   #7
BHPian
 
superutp's Avatar
 
Join Date: Dec 2011
Location: Bangalore
Posts: 377
Thanked: 143 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Thanks for insider information about the functioning of *fool* pumps (strictly no offence meant).

Interesting to note how the fuel dealer first gets cheated which results in the end consumer getting cheated.

The only bright side I see here is that our cars give better FE than we think they do
superutp is offline   (10) Thanks Reply With Quote
Old 30th May 2012, 09:00   #8
BHPian
 
infotech58's Avatar
 
Join Date: Dec 2009
Location: Toronto
Posts: 620
Thanked: 209 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

i strongly agree that in case one is paying for one litre of fuel, s/he should get one litre and nothing less than that. consumer can not be held responsible for something that is out of his control. this entire network needs better efficiency. i am sure this kind of shortchanging does not happen in any other countries, how do they operate? do they not lose fuel in evaporation?

also, if what is mentioned here is true for every pump, shouldn't it also be the case that ALL these pumps will fail the 5 litre calibrated measuring can test? how do they manage to get around that?
infotech58 is offline   (1) Thanks Reply With Quote
Old 30th May 2012, 09:24   #9
BHPian
 
2cents's Avatar
 
Join Date: May 2010
Location: India
Posts: 304
Thanked: 59 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

The modus operandi could be true in what you were told, but the figures are disputable: 100 L lost over one operating cycle due to evaporation, and the dip stick insensitive to 100 L change - doesn't make sense.


But how are we short changed! Can you throw some more on how they meddle with the fuel dispensed? I pay the amount/L, as declared prominently. As long as I get the measure I am billed for, why do I care?
2cents is offline   Reply With Quote
Old 30th May 2012, 09:30   #10
Distinguished - BHPian
 
SS-Traveller's Avatar
 
Join Date: Jan 2009
Location: New Delhi
Posts: 5,524
Thanked: 5,160 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

@aplang1:
  • You didn't talk about the sale of diesel, where evaporation losses are minimal.
  • No mention of the overages that the company allows in diesel, where a margin is left over!
  • What about profits and margins through the sale of premium fuels?
  • Please discuss the process of fuel quality and quantity checking that the oil co.s have in place.
  • Please enlighten us about the process of how pumps are tampered/adjusted to dispense short supply of fuel.
  • Do mention about the techniques used in adulteration, at the pump and/or in collusion with tanker drivers.
  • What about the profits and margins accruing from the sale of lubricants and other ancillary products bearing the oil co.s' brand?
  • Additional income generation from service centres / car washes etc. on the pump premises.
  • In some cities, there's additional revenue generation from night parking of cars & buses on the pump premises - how does it work in Chandigarh?
At the end of the day, the petrol pump business, even without indulging in shortchanging customers, is still a highly profitable business. I think you'll agree .

Last edited by SS-Traveller : 30th May 2012 at 09:38.
SS-Traveller is offline   (10) Thanks Reply With Quote
Old 30th May 2012, 09:37   #11
BHPian
 
Join Date: Nov 2010
Location: pune
Posts: 41
Thanked: 13 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Thanks for the detailed info, very few people in your position would be willing to even divulge such data, so I really appreciate your effort to share it with fellow bhpians.

Going by what you say it seems it is close to impossible to run a pump honestly. But as PatchyBoy says it seems its a matter of accepting lesser profits in order to be ethical. That's a choice that all of us face in different ways, we can all earn more money by bending the rules. Of course there may be other issues here, wherein there might possibly be a threat to life (not just livelihood) if one tries to be ethical.

Quote:
Originally Posted by PatchyBoy View Post
=
I do not see where the loss is. This my friend is cheating the unsuspecting customer to increase profits and not for staying in business. Loss of fuel due to evaporation is part and parcel of the business and is already factored in. Even if you gave the customer 1000 ml to the litre, the customer also subsequently loses some fuel due to this evaporation, doesn't he?

Every business has its own risks and rewards. Short-changing an unsuspecting customer is not acceptable, no matter what. Also, are you communicating that even the most trusted vendor recalibrates his meter to dipense 978 ml to the litre?

Rajan
So, bottomline is there a solution to this? Can you ask a pump to check the calibration? Are pumps that are marked pure-for-sure or other certifications any more trustworthy, do they even periodically check this status? Is there any remedy via the oil company authorities available to the average joe against a dishonest pump?
Also, if most pumps are owned by local strongmen and political affiliates will this lead to other consequences?

Lastly, there is another angle of kerosene adulteration to this. I am told that a substantial portion of the kerosene subsidy goes to petrol adulteration, and this finally finds its way into political coffers. But it may not be safe to discuss this issue even online , it is the elephant in the room..
grazd is offline   Reply With Quote
Old 30th May 2012, 09:38   #12
BHPian
 
lurker's Avatar
 
Join Date: Jun 2006
Location: Tura
Posts: 914
Thanked: 239 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

It makes more sense for petrol consumers to switch to CNG and LPG. Petrol can be used as a luxurious once in a while commodity. Useful for starting the car and running in while the switchover to LPG/CNG takes place.
lurker is online now   Reply With Quote
Old 30th May 2012, 10:10   #13
Senior - BHPian
 
S_U_N's Avatar
 
Join Date: Mar 2010
Location: Pune
Posts: 1,368
Thanked: 259 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

@aplang1: Good thread. Rated 4 stars. (and welcome to Team-BHP).

The evaporation quantity of 100 liters seems to be very high and unbelievable.
* Is this problem also faced in other countries with similar temperatures? Any links? What counter-measures do they take?

* What is your opinion on filling fuel during early morning/ night time, when temperature is low? Do we get more fuel per liter?

* How does one re-calibrate the machine to indicate 1 liter for 978 ml.

Is the 30% tax rate flat for this business?


@SS-Traveller: Good points.

Last edited by S_U_N : 30th May 2012 at 10:11.
S_U_N is online now   Reply With Quote
Old 30th May 2012, 10:37   #14
BHPian
 
advaitlele's Avatar
 
Join Date: Aug 2009
Location: Pune, Vadodara
Posts: 403
Thanked: 66 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Thanks for the different perspective aplang1.

That made an interesting reading to begin the day.

I as a customer am entitled to get what I pay for. What happens in the background from oil depot to the petrol pump and anything in between should not come to me.

By your calculations of 978ml per liter as a best estimate, means all the pumps - COCO or private - should fail the 5ltr quantity test. And the other parameters of adulteration, and other techniques to earn more are not even talked about.

As others have pointed out - I have never seen any pump owner who is not financially well off.

Its me as a customer and as a mango man who suffers the most in the end.
advaitlele is offline   Reply With Quote
Old 30th May 2012, 10:50   #15
Senior - BHPian
 
Jignesh's Avatar
 
Join Date: Dec 2011
Location: Wiesbaden
Posts: 1,564
Thanked: 816 Times
Default Re: The Petrol Pump Story - How Petrol Pumps Operate

Hello,

Well written thread & you have bought out hidden truth & open our eyes wide.

Another source of income for Petrol Pumps: Premium Fuels. Earlier I used to fill Premium Petrol only thinking it would be of better quality than normal Fuel. (I understand there is a thread here on T-BHP & I am not discussing the merits of Premium Petrol / Diesel here).

Then one day at Rajkot, a Petrol Pump attendent told me that they (Petrol Pump Owners) mix additives in Normal Petrol & sell it as Premium Fuel. Shocked by this fact, I have stopped filling premium petrol, but just think of Dealers margin here.

God knows what additives will he be mixing, but certainly he makes Rs. 2 / 3 per liter more by selling Premium Fuel.

Thanks,
Jignesh is offline   Reply With Quote
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
Trusted petrol pumps in Mumbai amitsingh08 Mumbai 209 8th April 2014 12:27
Petrol Pumps - Are we getting what we are paying for? StandUp Shifting gears 25 11th June 2012 19:49
Trusted Petrol Pumps : Ahmedabad cmdalvi Other Cities 6 30th December 2011 18:27
Petrol Pumps in Ooty qAnand Street and Travel Experiences 11 8th January 2011 21:31
Petrol Pumps in Hyderabad jaishrie Route / Travel Queries 3 10th December 2009 18:53


All times are GMT +5.5. The time now is 12:08.

Copyright 2000 - 2014, Team-BHP.com
Proudly powered by E2E Networks