Team-BHP - The Petrol Pump Story - How Petrol Pumps Operate

Quote:

The dip stick cannot tell you variations in the range of a few hundred litres and you feel all is well.

This is certainly not true. I can illustrate with calculations:
Fuel tank capacity: 20,000 litres
Dimensions (assumption): Depth x Width x Length: 20ft x 25ft x 40ft i.e. 20,000 cu ft.
Every foot (i.e. 12 inches) of depth will hold 1000 litres (because total depth is 20 ft)
Hence, 100 litres translates to 1.2 inch.
Now, a dipstick can certainly tell variation of even a 100 litres.

Quote:

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.

Petrol being what it is, I accept this evaporation loss figure unless I can prove it otherwise.

Hopefully, Shell dealers are LESS likely to do all this due to tighter processes and higher ethics from bot the company and the dealer.

This is probably the reason why customers complain of LOWER mileage when filling up at Shell rather than PSU bunks. Shell (hopefully) dispenses full 1000ml instead of 900-978ml thereby lowering the tankful-to-tankful mileage calculations.

Company Owned Company Operated (COCO) bunks are less likely to do the latter part of this 'hera-phiri', right? After reading this, I will try and fill up at COCO bunks even though none are on my daily commute route.

Quote:

Originally Posted by aplang1 (Post 2792827)

Operating expenses include electricity, manpower, maintenance and tips to the tanker driver and hafta to the government authorities.
===============
P.S. I have reported all the facts as they were told to me. Calculations are indicative.[/b]

You have provided a lot of factual information, but this cannot be taken as a reason for cheating. I keep hearing the human side of cheating - Traffic police accepts bribe because his pay is less. Politician takes bribe because he spent so much on elections. Babus take money for everything, because the cost of living is too high in Bangalore.

If you are not happy with your business, and the risk associated, move to a better one. The excuse to your cheating should not be the fact that others are cheating. That does not and should not, absolve you of the fraud.

My relatives are in wholesale grocery stores. I will take the example of bread that is sold. Their stores sell around 1800 breads everyday. In supply chain they loose around 2% of the material (because bread gets crushed, or packet get torn). A strike, bandh etc ensures they are left with expired bread they have to throw away. Their operational issues are the same as you listed. Employees, maintenance, hafta by police, Nagar palika bribes. Will you accept these reasons for they selling you expired bread or selling you bread that was opened and had a few pieces removed?

My maternal uncle owned and operated a fleet of these petrol tankers. Through him, I know a lot a petrol pump owners, who would not cheat a single paisa. They also face the same issues you listed, but they choose to remain honest.

Thanks for enlightening information, this will be useful. No wonder fuel efficiency when i fill at company owned petrol pumps and at Shell is higher as compared to others.

Also i agree with others when the owner earls ~60K on one fuel overall per month he might be making in multiple of Lakhs depending on location and crowd, hence there is absolutely no need in indulging in this short changing tactics. But as they say there is no end to human greed.

So does this mean that the pumps are calibrated appropriately to give out only 900 / 950 / 978 ml instead of the full liter ?

Quote:

Originally Posted by itwasntme (Post 2793051)

Company Owned Company Operated (COCO) bunks are less likely to do the latter part of this 'hera-phiri', right? .

How does it work at the HP bunks that are apparently tracked, and at COCO bunks ?

Thanks for the detailed write-up. Very honest & informative indeed.

From what you have mentioned, measurement tampering (by 22ml) is an accepted norm agreed amongst the petrol station owners. Is this an agreed norm across all petrol stations in India, irrespective of the brand?

If it’s a known fact that around 270 litres of petrol is lost in every cycle, why is not getting adjusted in dealer commission? The 22ml saved will account to around Rs. 1.75 per litre (taking petrol price as Rs. 80 per litre). Will it be better that the commission is adjusted to Rs. 3.25 (1.75 + 1.50), so that the dealers are not forced to shortchange the customers?

Is the meter tampering (to show 1000ml, when it is actually 978ml) happens locally or it is programmed that way from the manufacturer itself?

Quote:

Originally Posted by PatchyBoy (Post 2792886)

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

I think its not the commission loss that the pump owner is worried about. Its the 270 litres of petrol * Rs. 80 what the pump owner will lose which is close to 2.3% (270/12,000). This the owner is compensating by giving only 978 ml per litre which means a gain of 2.2% [(1000-978)/1000]. Just trying to get the calculations right.

Thanks for the info aplang, though I see that the end consumer is the loser. Also what SS-Traveller mentioned needs to be considered to determine the exact losses for the pump owner. No where am I saying that the pump owner should lose or is running an easy business but why should the end consumer bear all the pain.

A very informative thread that has enlightened many of us.
Evaporation, Tip to truck driver, Less Quantity sent from the oil company, costs of labour, income tax, sales tax et al - I missed a point where that is the CUSTOMERS' PROBLEM! :mad:

As someone mentioned, I pay for a liter of fuel and I have to get exactly that.

Reading this thread and all the replies, there are two things occurring to me,

There is an option for any customer to check the quantity dispensed using either 5 liter conical tin can provided by the oil company or a transparent 1 liter fiber glass beaker (remember your chemistry lab utensil!) if he/she is doubtful.
I had checked this once and the lower minuscus indeed touched the brim of the can (Of course the reading on the pump said 5L!). If the pumps are calibrated for dispensing 950-970ml for a liter, how did this happen? And even if we think that they could have rigged the can itself, what are the chances of exactly rigging a tin can to a quantity that the pump is dispensing? Even if this was possible, read my next point.
If you walk-in to a pump with a bottle (say a soft drink pet bottle of 1 or 2L capacity) and ask it to be filled, the guys at the petrol bunk always direct you to one particular pump (Have done this more than a fifty times in 4 years during my college days and this has invariably been the case). Has anyone experienced this? Does it mean that, that one pump is calibrated to exactly dispense 1000ml?

PS: I am not trying to nit-pick the facts that have been gathered. Neither am I countering any views here. These are just my thoughts.

Quote:

Originally Posted by aplang1 (Post 2792827)

Expenses:

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.

I am sure the dealer does not have to pay sales tax from his margin.

Also, these evaporation loses are very much incorporated while fixing the fuel prices/dealer margins. 60k profit is so untrue, they make more than 2-3 lakhs a month which is why most of the pumps are run by politicians and their kin.

Quote:

Originally Posted by PatchyBoy (Post 2792886)

So, what about the 270 litres that the dealer has paid for, but cannot sell?

Assuming petrol at Rs.70 and Rs.1.5 commission per litre, the dealer pays 12000*68.5 = 8,22,000 for stock. If he sells you 1000ml per litre, he makes 11730*70 = 8,21,100 by selling the same stock. That's a loss of Rs.900 per cycle or Rs.450 a day.

The dealer is just passing on the cost to you - the customer - which is not very different from any other business.

Correct me if I am wrong.

Considering only "ideal" scenario as presented by you.

Isn't the pump owner paying for 12,000 Ltr and getting only 11,730 Ltr? (97.75% of what he paid for).

He is delivering us 978 ml for a Ltr (97.8% of we paid for).

Why should he deliver 1 Ltr lose out 2.2%?

Only oil companies are gaining out of this (0.8% - 100 Ltr for every 12,000 Ltr).

Only way to stop this could be with use of high insulation all over the supply chain.

I believe that oil companies must have evaluated this option and went against it after realizing that it will cost a bomb.

Quote:

Originally Posted by StarrySky (Post 2793195)

Agreed. But that still does not justify giving me 978 ml and calling that a litre. As others have already pointed out, I, as the end customer, having nothing to do with your 270 litre loss and do not believe it is fair that I should be penalized for the same.

Being a small businessman myself (home made chocolates), I do not mark a pack of chocolates 500gms, when the pack in reality contains 478gms. I price the commodity factoring in transport loss and other possible losses, to ensure that my profit margins do not suffer. If I resorted to marking the weight more than the reality, that would be cheating an unsuspecting customer, wouldn't it?

Rajan

Quote:

Originally Posted by itwasntme (Post 2793051)

Company Owned Company Operated (COCO) bunks are less likely to do the latter part of this 'hera-phiri', right? After reading this, I will try and fill up at COCO bunks even though none are on my daily commute route.

Remember that the 'company' is the trigger for this cheating cycle, as per the OP's post.
Also remember a post from the petrol bunks in your city thread, of someone being filled 43 litres of petrol, when his car's capacity was only 35 litres, from an COCO outlet in West Chennai. He had made a complaint to the OMC. Instead of taking action against the culprits all that happened was, the manager of the pump offered him some free petrol as a bribe.

If the company is underselling petrol to the pump owner(and he is well aware of it!), then the pump owner should take actions to sort that out with the company, rather than doing the same underselling to his consumer.
Shouldn't this be the approach.

Also, for every business there will be margins for 'Shrinkage'(retailing concept for loss of products between point of manufacture or purchase from supplier and point of sale) which should take care of the well known aspects of petrol evaporating etc.

On paper, the facts presented may look genuine, but there are lots of compensating factors for such 'shrinkages' in retail industries which will absorb the mentioned 'losses'.