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Old 1st May 2015, 10:39   #46
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Default Re: Petrol Pump Business: No longer as lucrative?

With the deregulation in fuel and introduction of GST bill, the tax component per unit litre (which varies hugely between various states) will hopefully reduce - which then might render this a good value proposition. This is for both private and state-owned pumps

If cashed up Ambani's and Others had to close their fuel pumps, in spite of investing huge money for infrastructure - there must be something wrong in the system as of know (even with the current degree of deregulation . The cross over point in economics (which again co-relates to various parameters) will result when the subsidies from the Govt are cut to an an extent greater than now.
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Old 1st May 2015, 11:33   #47
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Default Re: Petrol Pump Business: No longer as lucrative?

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Originally Posted by Rahul Bhalgat View Post
Big housing societies / townships have LPG tanks and every household receives LPG through pipeline. On a similar basis, we can have petrol and diesel tanks and pumps in big housing societies / townships. The company will directly supply there. This will make the fuel available for 24 hours, at the doorstep.

Even if this supply needs to be routed through the dealers, the oil companies can route this through the dealers who have lower footfalls because of factors beyond their control.

With this, some of the dealers (who have low volumes) can be terminated and they will be free to capitalise their land.
You have made a very good point, bu I am sure this will be thoroughly opposed by the existing pump operators.
Everyone likes to crib about the potential loss of their livelihood.
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Old 1st May 2015, 12:36   #48
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Originally Posted by Rahul Bhalgat View Post
As I gather from the thread, running a petrol pump honestly yields lower returns (unless you have a good consumption, which every pump cannot have) and blocks the land for a long period. One relative of mine was allotted a petrol pump from Essar few years back. But he too backed out after looking at the financial equation.

Big housing societies / townships have LPG tanks and every household receives LPG through pipeline. On a similar basis, we can have petrol and diesel tanks and pumps in big housing societies / townships. The company will directly supply there. This will make the fuel available for 24 hours, at the doorstep.

Even if this supply needs to be routed through the dealers, the oil companies can route this through the dealers who have lower footfalls because of factors beyond their control.

With this, some of the dealers (who have low volumes) can be terminated and they will be free to capitalise their land.
I would hate to think what will happen when the pipelines get cut (from largely unqualified and unskilled) due to maintenance of services like road works, telecom etc. Yes, there will be non-return valves, but still the risk to human life with the idea is huge and incongruable.
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Old 1st May 2015, 23:38   #49
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Default Re: Petrol Pump Business: No longer as lucrative?

I think it ultimately depends on the volumes one is able to generate as a petrol pump is a very high operating leverage business - almost all costs are fixed, therefore, higher the volumes, higher the profitability.

One of my friends who had a petrol pump a state capital had mothballed it. He mentioned that it does not earn much and there is a lot of 'other' costs due to the licencing involved and it was not worth the effort / money. Could also be because it was on the outskirts of a city.

From my limited knowledge about the operations of a pump:

The margins on the fuel is not that high - in paises per litre and not rupees per litre. Dealers used to make money on two things - quantity rigging & mixing. The mixing used to be largely on the oil that was sold loose from the barrel (which was adulterated with diesel, kerosene, etc.). With the reduction of 2-stroke vehicles, consumption of 2T oil has become almost negligible and most vehicle owners now-a-days tend to buy sealed packs instead of using oil from barrels. These days, with stricter control of the parent companies, mixing has become negligible and quantity rigging has reduced, but may not fully stopped. A new revenue stream in terms of margins on lubes, etc. has also come in now-a-days.

Under the old system when prices did not change so often, they used to make money once in a while on the stock they had when prices increased (remember a lot of pumps used to have closed / out of stock board when price increases were announced).

I also think that the quality & quantity of fuel is largely dependant on the business model of the pump. If the pump's operational P&L is with the dealer, the incentive for these is much higher as he sits there and can manage things. In comparison, where the pump is owned by the company / leased to the company i.e. P&L sits with the company & the dealer only operates it for a fixed fee / owned & operated by a co-operative society as compared to a particular individual, then the problems are much lower.

I remember, in my hometown, the quality of fuel at a pump operated by a co-operative society was considered to be much better than another one operated by a private party.
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Old 2nd May 2015, 13:55   #50
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Default Re: Petrol Pump Business: No longer as lucrative?

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Originally Posted by Raikkonen View Post
I would hate to think what will happen when the pipelines get cut (from largely unqualified and unskilled) due to maintenance of services like road works, telecom etc. Yes, there will be non-return valves, but still the risk to human life with the idea is huge and incongruable.
We do not need pipeline supplying the petrol to the housing society / township. We need a small underground tank and a dispenser. The tanker can unload into the underground tank.

Even with LPG, it is a practice to store the gas in the big tank / cylinders bank at the ground level. Gas is piped to individual houses where the regulator and meter is installed. If the LPG can be stored safely here, the petrol / diesel too can be stored with proper precaution.

We also do not need the pipeline to the individual house (like it exists for the LPG gas). The consumers in the society will fill-up from the dispenser. Advantage for the consumer is that the fuel will be available all 24 hours, in the housing society itself. Convenience for the dealers: The bulk supply can be routed through the dealers who have low volumes. Or the fuel can be supplied directly by the company and low-volume dealership in the area can be closed, to free his precious land.

My suggestion is intended to propose a solution to the problems of low margins for the dealers without increasing the prices for the end user. Proper solutions can be conceived and implemented for the safety concerns.
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Old 2nd May 2015, 14:03   #51
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Default Re: Petrol Pump Business: No longer as lucrative?

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You have made a very good point, bu I am sure this will be thoroughly opposed by the existing pump operators.
Everyone likes to crib about the potential loss of their livelihood.
Yes, appreciate your anticipation.

But this will help the oil company to free the dealer having low volumes and low profitability. Such dealers can terminate their dealership and their land (which has been committed and locked with the oil company for a long period) will be free to make more profitable cause.
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Old 2nd May 2015, 20:22   #52
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Default Re: Petrol Pump Business: No longer as lucrative?

Quote:
Originally Posted by Rahul Bhalgat View Post
We do not need pipeline supplying the petrol to the housing society / township. We need a small underground tank and a dispenser. The tanker can unload into the underground tank.

Even with LPG, it is a practice to store the gas in the big tank / cylinders bank at the ground level. Gas is piped to individual houses where the regulator and meter is installed. If the LPG can be stored safely here, the petrol / diesel too can be stored with proper precaution.

We also do not need the pipeline to the individual house (like it exists for the LPG gas). The consumers in the society will fill-up from the dispenser. Advantage for the consumer is that the fuel will be available all 24 hours, in the housing society itself. Convenience for the dealers: The bulk supply can be routed through the dealers who have low volumes. Or the fuel can be supplied directly by the company and low-volume dealership in the area can be closed, to free his precious land.

My suggestion is intended to propose a solution to the problems of low margins for the dealers without increasing the prices for the end user. Proper solutions can be conceived and implemented for the safety concerns.
Hi Rahul,
You cannot do that just like LPG. There is an explosives licence that needs to be taken for this and there are specifications to be met, which are very strict unlike other licences.

Here again, IMHO, gas is not dispensed like petrol or diesel but directly sent through copper pipes to the delivery point for use. The pipes are checked for leakages and are highly secured. Whereas, petrol and diesel needs to be dispensed to the vehicles through pumps and delivery guns, and that has to be done under secured environment with training and periodical maintenance. Most importantly, in case of any accidents the damage to life and property is catastrophic.

The dealer's work on commission and not on percentage hence any increments in pricing do not necessarily increase the margins for them. Also, the commission are not based on today's inflation so there is a lot of pressure on them.
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Old 2nd May 2015, 21:21   #53
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Default Re: Petrol Pump Business: No longer as lucrative?

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Hi Rahul,
You cannot do that just like LPG. There is an explosives licence that needs to be taken for this and there are specifications to be met, which are very strict unlike other licences.

The dealer's work on commission and not on percentage hence any increments in pricing do not necessarily increase the margins for them. Also, the commission are not based on today's inflation so there is a lot of pressure on them.
Yes, appreciate your comment about the safety directives and explosive licenses. I am not in favour of any compromise in these in case of fuel delivery in big housing societies. Though it looks difficult, it can be done starting with one or two pilot projects carefully implemented by the oil companies.

I appreciate your information that dealers do not work on % and their commissions are not based on today's inflation. As highlighted in this thread earlier, the dealers' problem is that their lands at prime locations are locked in contract with oil companies. And low commission does not make the petrol pump profitable at low volumes. Even with high volumes, they are not as profitable as returns from real estate.

Therefore, if the big housing societies / townships receive bulk supply with their own pump (without compromise in safety), oil companies can free some of the dealers and these dealers can make much better commercial gains from their property. This will help the dealers without burden on consumer's pocket.
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Old 3rd May 2015, 13:45   #54
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Default Re: Petrol Pump Business: No longer as lucrative?

Quote:
Originally Posted by Rahul Bhalgat View Post
Yes, appreciate your comment about the safety directives and explosive licenses. I am not in favour of any compromise in these in case of fuel delivery in big housing societies. Though it looks difficult, it can be done starting with one or two pilot projects carefully implemented by the oil companies.

I appreciate your information that dealers do not work on % and their commissions are not based on today's inflation. As highlighted in this thread earlier, the dealers' problem is that their lands at prime locations are locked in contract with oil companies. And low commission does not make the petrol pump profitable at low volumes. Even with high volumes, they are not as profitable as returns from real estate.

Therefore, if the big housing societies / townships receive bulk supply with their own pump (without compromise in safety), oil companies can free some of the dealers and these dealers can make much better commercial gains from their property. This will help the dealers without burden on consumer's pocket.
Yes Rahul, some of the points made by you are valid enough on a hindsight. No builder or resident association will be ready to take the risk involved. There was a proposal discussed with a prominent builder in Bangalore sometime in 2006-2007 about what you have suggested. This could not go through due to the regulations involved with respect to safety norms, explosive license and their renewals, and continuous monitoring.

It does not mean it cannot be tried again; definitely yes, but it requires both the builder and later the resident welfare associations to take the responsibility of the safety norms on running it. Tweaking your suggestion a little, if you know someone in the big housing societies or in the resident associations then I will take the initiative to talk to the petroleum dealers to see if they can manage the micro-pump as a pilot project. I can even take this project to the petroleum companies for their opinion as well.
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Old 3rd May 2015, 17:37   #55
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Default Re: Petrol Pump Business: No longer as lucrative?

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Yes Rahul, some of the points made by you are valid enough on a hindsight. No builder or resident association will be ready to take the risk involved. There was a proposal discussed with a prominent builder in Bangalore sometime in 2006-2007 about what you have suggested. This could not go through due to the regulations involved with respect to safety norms, explosive license and their renewals, and continuous monitoring.

It does not mean it cannot be tried again; definitely yes, but it requires both the builder and later the resident welfare associations to take the responsibility of the safety norms on running it. Tweaking your suggestion a little, if you know someone in the big housing societies or in the resident associations then I will take the initiative to talk to the petroleum dealers to see if they can manage the micro-pump as a pilot project. I can even take this project to the petroleum companies for their opinion as well.
Thanks for your initiative. Will talk to few associations / builders and get back to you.
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Old 6th May 2015, 13:15   #56
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Default Re: Petrol Pump Business: No longer as lucrative?

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Hi Rahul,
You cannot do that just like LPG. There is an explosives licence that needs to be taken for this and there are specifications to be met, which are very strict unlike other licences.
It is bunkum, if what you say is true about licensing and regulations. Perhaps the bureaucrats had some vested interests ...

LPG is more dangerous in all terms than petrol or diesel.
Diesel is very less volatile, petrol is highly volatile, and LPG ... LPG is always a vapor in atmosphere.
Liquids don't catch fire - vapors do. So in terms of inflammability it is LPG>Petrol>Kero>Diesel

Therefore, technically, if you can allow colonies to keep LPG cylinders in a farm and harvest the LPG and send to each house via pipes: you are allowing a more dangerous thing to operate compared to a liquid storage bunk in the colony and dispensing liquid to vehicles via pipes.

Last edited by alpha1 : 6th May 2015 at 13:19.
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