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What is Petrol Pump License?

Petrol Pump is considered one of the best business ventures and also as one of the most profitable business in India, however to start the petrol pump venture is not as easy as it looks mainly because getting a petrol pump license in India is not an easy process. One has to comply with lot of guidelines and formalities and it is important to understand it all before venturing in the petrol pump business.

As per the 2016 statistics, India has approximately 60,000 petrol pump installations, out of which approximately 25,000 belong to Indian Oil Corporation (IOCL) and 13,000 each to Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) and the consumption of fuel has increased by 10.7% to an every high of 16% in the year 2016. Also fuel sector is one of the core industries in India and is one of a vital factor to be considered in decision making of all other sectors.

Petrol Pump License Eligibility in India

With the entry of private firms such as Reliance Petrol Pump and Essar Petrol Pump, the competition has increased multifold mainly because these firms have taken an initiative to link the petrol and diesel price to the market price, which was welcomed by all the segments. However, Indian government has always been committed to promote transparency in the process of allotting the petrol pump license and has formulated new procedure according to which you will be called for the second round of the selection process only if you are fit in the pre-established eligibility criteria and thus the entire selection process has been divided into first and second phase, such as:

The First Step of the Process: Eligibility Criteria

As per the new procedure, the very first step of the selection process is its eligibility criteria, which is as mentioned below:

  • The applicant must be an Indian citizen.
  • In case if the applicant is a Non-Resident Indian, then he must be living in India for at least 180 days before applying for the petrol pump.
  • Age should be between 21 to 55 years. Special exemption has been given to those who belong to freedom fighters category.
  • The applicant must be having his class Xth certificate in original, which is used as address proof.
  • Minimum educational qualification for those belonging to General Category is Class 12th while the applicant needs to be at least Class Xth pass in case he belongs to SC / ST / OBC category.
  • Above mentioned criteria is for those who are living in rural areas. For those who belong to urban areas, the minimum education qualification is Graduation/ Chartered Accountant/Company Secretary etc.
  • Minimum education qualification is not applicable to those belonging to freedom fighters category.

Second Step of the Process: Selection Process

Anyone who wishes to apply for a petrol pump need to look after the finances and arrange for the pre-requisite funds because the second step of the process caters to this very requirement.

  • If an applicant wishes to open the petrol pump in the rural areas, then he or she needs to have a minimum of Rs 12 Lakh by his side. However, the amount becomes almost double if the desired location of the petrol pump is in urban area i.e. the applicant must have a minimum of Rs 21 lakh. The required amount could be in multiple forms such as cash, jewellery, bonds, mutual funds, saving accounts, deposit with banks/registered company/postal scheme, national saving certificate, share of limited companies in demat account. However, one needs to be a bit careful when and if using bonds, mutual funds and shares because only 60% of these are considered for eligibility criteria.
  • Apart from fund, land is an important criterion of the selection process. Normally one should have approximately 800 square meters to 1200 square meters of land for a petrol pump. It is important to mention right information regarding the area of land because not only you have to furnish different types of documents to prove the ownership of the land, oil marketing companies will also scrutinize the location before allocating the petrol pumps. Normally they prefer to open the petrol pumps near the State Highways, National Highways and busy market areas. As per the selection process, the applicant should have a land in the area or you can take it on lease for a minimum time period, as mentioned in the notification.

Apply For A Petrol Pump Dealership

If you wish to apply for a petrol pump and fit in the above mentioned eligibility criteria and selection process, next step is to apply for a petrol pump dealership which you can do by following below mentioned steps:

  • Generally the oil marketing companies publish an advertisement to set up a Petrol Pump for a particular location in all the leading newspapers. These ads are also published on the official website of oil marketing companies and these notifications mention the location(s) where the company proposes to set up a retail outlet or petrol pump. Your first step is to locate such ads and gather information such as location and eligibility criteria mentioned.
  • If you fit in the requirement, you can apply for the petrol pump directly from the website of oil marketing companies before the last date.
  • Companies such as Indian Oil, Essar etc have their Retail Outlet Franchise Inquiry Form on their official website and if you want to apply for the petrol pump of that particular brand, you can go to the official website and fill up the form. For example:
  • If the oil marketing companies receive a large number of applications, it announces the winner through the lottery system and if you are lucky one to win the lottery, you have to submit all related and relevant documents with the oil company.
  • Once you have submitted all the related documents and proof of required funds by your side, you will get the dealership of the petrol pump as per the published advertisement.
  • Once you have got the license to open the petrol pump, you also have to register for Goods and Service Tax (GST), apart from opening a current account in the name of his petrol pump.

Application Fees For A Petrol Pump Dealership

While the application fees for getting petrol pump dealership is Rs 100/- in case of rural retail outlets and INR 1000/- for regular retail outlets. However, there is a concession of 50% for those belonging to SC/ST/OBC categories. Also, one applicant can apply for one location only. Apart from the application fees, you have to pay a certain amount as non-refundable fees in case of dealer owned/company leased sites and certain amount in case of corporation owned sites, i.e.

  • For Dealer Owned/Company leased sites: In this case, you have to pay non-refundable fixed fees of INR 5 lakh in case of rural retail areas and INR 15 lakh in case of regular retail outlets.
  • For Corporation Owned Sites: In this case, you have to pay a non-refundable bidding amount of INR 10 lakh for rural outlets and INR 30 lakh for regular retail outlets.

Apart from the application fee, one has to pay the license fee in order to obtain petrol pump license i.e. at present the license fee for petrol pump is INR 18/KL for Motor Spirit and INR 16/KL for High-Speed Diesel for dealer owned “B” / “DC” site Retail Outlets and INR 48/KL for Motor Speed and INR 41/KL for High-Speed Diesel for a corporation owned “A” / “CC” site retail outlets.

Once you have got license of petrol pump dealership in your location, you have to ensure that you carry out the operations in legal and ethical manner. Also you need to be careful before you decide to transfer your petrol pump license to someone else, because firstly you cannot do so just like that and secondly you cannot transfer your petrol pump license directly and there are series of actions which you need to follow. Most importantly, you have to file for Reconstitution of petrol pump license and in order to file for same, your petrol pump should be at least 5 years old and your petrol pump license should not have been reconstituted for last 5 years.

If you fit in these two criteria, you can apply for the reconstitution of your petrol pump license in a prescribed form with all relevant documents which can be collected from your sales officer and as per the reconstitution; you can transfer 49% ownership to the incoming party whereas you still are the owner of 51%. Once your new partnership firm is registered as per the new defined percentage ownership, you got to wait for next 5 years in order to apply for another reconstitution in order to transfer your petrol pump license 100%. Thus, transfer of petrol pump license obtained on your name is not only a tedious but also a lengthy process.

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