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The Legal Procedures for Installing a Petrol Pump

Prior to opening a petrol pump, one must consider its commercial and future potential in the market. Other than that, it is important to take certain factors into consideration.

  • The land and pumps’ location
  • Involving quality legal and financial services
  • Attempting to offer quality services
  • Utilizing the best technology available

Today, delivering the best and quality services to the customers is one of the factors having paramount importance, which further leads to gaining a competitive edge in the market.

What are the current available opportunities?

  • As with the population growth, the income per capita is also increasing, and this further leads to a prominent increase in the number of vehicles in the country.
  • In winters, diesel and petrol pumps have an added advantage over CNG pumps due to the low pressure of the gas.
  • The increasing demand for petroleum and other related products in the neighbour countries, specifically Afghanistan.
  • The elastic nature of petroleum products’ demand.
  • Exploration of several oil sources.

The Legal Status of the Suggested Business

With regards to law, the proposed business is that of a franchise, and the entrepreneur has two options– either a solo or joint proprietorship. Though the choice is contingent on the entrepreneur’s decision, the feasibility report, typically, is based on the single-owner franchise.

Fee and Security Deposit

The entrepreneur must pay both the joining fee (approx. 100,000) and security deposit (300,000, however, may vary) to be eligible to join an oil marketing company (OMC) as a dealer or retailer.

The Franchise Fee

The fee (usually Rs.0.10-0.15 per litre supplied) is to be paid to the OMC on daily basis. This is basically a set-off because of the fact that the OMC bears all of the equipment, machinery and post-maintenance expenses itself.

Additional service structures, including car wash, tuck and tire shop can be installed on the same facility. The car wash and tire shop fee is approx. Rs 0.02 and 0.03 per litre respectively.

*The fee figure is just an estimate; actual fee is decided upon agreement between the OMC and franchisee.

Profit Share

Like an OMC, the franchisee also earns the profit on every litre of petrol/diesel sold. The regulatory authority is OGRA (Oil and Gas Regulatory Authority) hence the ultimate decision of the percentage is in the hands of OGRA.

License Process

Opening a petrol filling station requires a few crucial steps to follow to be able to fit in the criteria of both an OMC and the government.

Application

Anyone who plans to open up a franchise is required to submit a written application to the respective OMC. The applicant makes a request to the OMC for the land feasibility assessment.

Feasibility Study

The OMC, after an initial survey, examines and assesses applicant’s social and financial credibility and skills. After the assessment, OMC experts carry out a feasibility study to measure the potential of land with respect to the location facility. The study then leads the OMC to sign an agreement with the applicant and acquire the studied land on rental lease for at least 15 years. The payable rent is basically a small amount based on the land location.

No Objection Certificate

The next important step is to get a No Objection Certificate from the concerned departments, and this step involves a whole process. First, the OMC’s architects draw a map of the sight, complying with the national standards. The application along with the map is then submitted to the District Coordinator Officer (DCO) to get NOC. The officer holds a meeting with all the concerned departments to thoroughly assess and analyze the proposal. Considering the say of each departmental representative, the DCO then release a No Objection Certificate.

Explosive License

Storage and sales of explosive products require a license from the regulatory authority – the explosives department. The department issues a license once the OMC submits the DCO-approved NOC along with the map at the explosives department.

Construction

The construction on the site starts once the explosives department permits. The infrastructure cost is divided equally between the OMC and the entrepreneur. The cost of machinery and equipment are the responsibility of the company, and the civil work expense goes out of the entrepreneur’s pocket. The completion follows a process where the OMC’s expert engineer inspects the sight, and if the site abides by the national standards, the engineer issues a safety and completion certificate.

Grant of License

The last step consists of a more detailed and critical inspection by the explosives department. The department’s inspector thoroughly inspects the site, specifically the storage tanks, and if it complies with the rules and standards, a license is issued to start the business.

Inputs

Capacity

Based on double-shift services, 2.85 million litres of petrol and diesel is the ideal annual sales capacity. For financial estimates, capacity will be 80% utilized in the beginning year, with a 5% increase and will close at 95%.

Land

15,000-ft is required to set up various additional services, including car wash, office building and tire shop.

Appropriate Location

The suitable and best location for the filling station is nearby a populated area. Other important resources should also be kept in consideration, like human resource, electricity, water, and many others.

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