NEW DELHI: State-run fuel retailers will kick off the expansion of their retail network for the first time in four years by seeking on Sunday applications for petrol pump dealerships in altogether 65,000 locations across the country, except in poll-bound states.
Sunday’s announcement seeking dealership applications will cover 75-80% of the total locations where the companies intend to set up petrol pumps. Dealerships in states under the poll code will be announced after the elections.
The announcement follows a signal from the oil ministry to the public sector fuel retailers and is well-timed to turn into a bonanza from the ruling NDA ahead of the general election, though the outlets are to be set up over the next three years.
If the scale of the planned expansion at one shot raises question over the viability of new pumps, government officials and company executives say past experience has shown that not all the advertised pumps finally see the light of the day.
“Several issues come up during the award of dealerships. Sometimes it is related to land, at other times it could be one or several of many other factors. So in effect, one can say 15,000-20,000 out of the total number advertised will come up at first,” a senior official told TOI.
But even then it could mean investments of thousands of crores in the fuel retailing business, jobs for tens of thousands of people. New pumps also mean more business for equipment suppliers, transporters and tanker manufacturers.
But existing dealers are opposed to such massive expansion as they don’t see the much economic sense behind the move. “The average sale of existing outlets has dropped from 170 Kl (kilolitre) to 140, while costs rising and margins shrinking. Besides, what is the sense of adding petrol pumps when the government is talking of alternative fuels,” All India Petroleum Dealers Association president Ajay Bansal told TOI?
He said it would have made sense if pumps were being added along with new highways. Other market watchers said such large-scale expansion by government fuel retailers would increase their market dominance, which is almost 90% now, and could force private companies to rethink expansion plan at a time when the government is trying to attract investments in the sector.
According to government data, India has 62,585 petrol pumps, only 6,000 of which are run by private companies. The country’s fuel demand grew by over 5% to 205 million tonnes in 2017-18.
Government retailers were not allowed to expand their network in the last four years as the government first planned to rework the official guideline and then decided to make way for new guidelines by the companies. The new guidelines follow the government reservation norms for disadvantaged sections of the society but give operational flexibility to companies in appointments.
The new eligibility guidelines have scrapped the applicants’ fund requirements and relax rules on land ownership. Under the new rule, people with no land or a firm tie-up with landowner will also be allowed to apply for the dealership. Earlier applicants were required to possess Rs 25 lakh in bank deposits or other financial instruments for regular outlets and Rs 12 lakh for rural outlets, according to the previous policy.
The winner among applicants will be picked by online draw of lots, after which the credentials will be verified subject to the candidate depositing 10% of the security deposit. Previously, the verification process was undertaken for all applicants and only eligible candidates participated in the draw of lots. The entire selection process will be done online.