Now anyone can have a petrol pump in India!
BI India BureauAug 3, 2015, 03.32 PM
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Soon you wont have to drive on your nerves and look out for a petrol pump when your fuel meter goes red. If all goes well, anyone and everyone can have their own petrol pumps at a preferred place. As per a news report by The Economic Times, the government may be coming up with an offer state-run fuel retailers the freedom to allocate dealership to anybody willing, a move that has the potential to revolutionise the sector, curb malpractices, and most importantly arm state companies against the emerging competition from private rivals such as Reliance Industries and Essar Oil that have resumed expansion following a deregulation of fuel sales.
Government officials after meeting the executives of Indian Oil Corporation (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) will work out the details of the plan, sources told the ET.
As per the proposal, anyone wanting a dealership can apply at any point in time and be awarded one quickly as long as he makes the entire investment involved in setting up a filling station.
At present, state firms are saddled with norms requiring appointment of about half of dealers from backward class, restriction of dealership to just a member in the family, follow the arduous appointment process and also cater to political interests.
The memory of a decade back is still fresh in the minds of state-run firms when private players snatched nearly 15% share in the sale of diesel within years of their entry, mostly due to extensive use of technology, enhanced level of service and total control over dealers. This is why they are lobbying the government to give them a free hand to fight private competition.
"We have had little control over distributors. We have always had the dilemma that if we were to fire a dealer we may lose the market to a competitor and not be able to recover that quickly because the appointment of a replacement would take a long time," an executive told the ET.
He was referring to the challenges state firms have faced in firing distributors engaged in malpractices, which lower the quality of service to customers. But a flexibility to appoint a new dealer will remove this dilemma, he said.
Moreover, the government has mandated a 10% automation every year at IOC, HPCL, and BPCL, which currently have about a third of their regular petrol pumps automated. This technological application helps companies keep a check on adulteration at fuel stations.
The proposed system will also help state firms attract most entrepreneurs interested in the petrol pump business, leaving fewer candidates for the likes of Reliance or Shell. Until now, the private players could easily offer their dealership to those who had lost out in the race to win a public sector petrol pump.
"There is still an inclination for public sector pumps. Also, the private players can't match the security of supply we provide because of our nationwide infrastructure," the executive said.
A government official said the move will also enhance state firms' presence across markets, a "brand boost", and help find dealers easily.
Soaring land prices in cities and falling average volumes at filling stations due to proliferation of pumps have made appointing dealers a difficult exercise.
To appoint a dealer, state oil companies survey markets to identify locations for new filling stations, then seek applications from eligible candidates meeting government guidelines and then pick one either through a draw of lots or by an open bidding process. In most cases, the cost of setting up petrol pumps is shared between companies and dealers.
Until a few years ago, the appointment process also included interview of candidates, making the process prone to influence and corruption.
India has about 53,000 petrol pumps with 95% of them under the control of state firms.