Petrol Pump Dealership
After identifying the location for setting up the retail outlet dealership, HPCL releases an advertisement in leading newspapers (one English and one Hindi / vernacular) inviting applications from candidates belonging to the category for which the location is reserved. The eligibility criteria, terms and conditions and procedures are described in the advertisement (also given below on this page). Interested candidates, meeting the stated requirements, are required to apply in the application form (given below), as per the details given in the open advertisement.
The applications are scrutinized, interviews are conducted and the successful candidate is selected. For more information, please read the Information brochure given below. Also read: Frequently Asked Questions (FAQs) regarding Retail Outlet Dealership.
Starting a Petrol Pump Business
Petrol pump business is a lucrative business in India for those having good property on highways or roads with high traffic. The number of vehicles in India are increasing day by day due to improvements in the infrastructure, increase the demand for petrol and petrol pumps. In recent years, petrol pumps have also diversified their operations and now offer a slew of services to increase profitability. Most petrol pumps now also include a restaurant or rest area, earning additional income. In this article, we look at the procedure for starting a petrol pump business in India.
Choice of Business Entity
Petrol pump business is long-term in nature, involving significant capital investment, license agreements and high revenue. Hence, private limited company is the most ideal business entity for starting and operating a petrol pump. Private limited company would ensure that the investment in the petrol pump, effort taken to obtain license, etc., by the promoters are easily transferable to another person, in case of an exit. On the other hand, petrol pumps started as a Proprietorship or Partnership would involve extensive legal formalities and complications in terms of ownership transfer. It is most ideal if the ownership of land, license to operate petrol pump, etc., are kept in the same Company. However, in many cases, the ownership of land is kept in the name of promoter, while the operations and licenses are kept in the company name.
Further, private limited company is preferable for starting a petrol pump vs a limited liability partnership (LLP), as the sales turnover in a petrol pump will be very high. All LLPs having a turnover of more than Rs.40 lakhs are required to have its accounts audited. Hence, cost for compliance of a company and compliance of a LLP will be similar, making a company more preferable in the long-term.
VAT Registration for Petrol Pump
The sale of fuel like petrol and diesel attract value added tax in India. Hence, VAT registration is a must for all petrol pumps from the date of commencing operation. VAT registration can be obtained from the State Government’s local tax office or online through IndiaFilings.com. Further, since the sale turnover of a petrol pump is usually high and VAT for petrol and diesel are also high, petrol pumps have large VAT liability. Hence, care must be taken to ensure proper payment of VAT and VAT return filing.
Process for Starting Petrol Pump
The process for stating a petrol pump has undergone significant changes in the recent years. After identifying the location for setting up the retail outlet dealership, oil companies like HPCL, IOCL, BPCL and others release advertisement in newspapers inviting applications starting a petrol pump in the location advertised. At the first level, the candidates are vetted to ensure they meet eligibility criteria, terms and conditions and procedures, as described in the advertisement. The mark based evaluation of petrol pump candidate and interview process has been removed to bring in transparency in to the selection process. Hence,all applicants meeting the eligibility criteria will qualify for further selection process. Final selection of the candidate is now made through draw of lots or bidding process depending upon the type of retail outlet.
In order to promote the transparency in awarding of petrol pump license and franchise by Oil Marketing Companies, a new dealer selection process has been formulated. Under the new process, the applicant is first checked against a pre-established eligibility criteria. All applicants conforming to the eligibility criteria are selected for the next round, wherein lots are drawn or a bidding process is used to select the dealer. Hence, eligibility criteria now plays an important role in the determination of petrol pump dealer. In this article, we look at petrol pump license eligibility criteria for individuals.
Basic Eligibility Criteria
To be eligible to obtain a petrol pump license and start a petrol pump, the individual must be an Indian Citizen and a resident of India, as per the Income Tax rules. To be considered a resident of India, an individual should have stayed in India for 182 days or more in the previous Financial year.
The applicant must also be not less than 21 years old and not more than 55 years. Proof of age of the applicant must be validated by submitting a copy of 10th Standard Board Certificate or Secondary School Leaving Certificate or Birth Certificate or Passport or Affidavit for age or Identity card issued by Election Commission.
All applicants making an application for petrol pump dealership must have basic education. Rural petrol pump applicants who are SC/ST or OBC, must have passed minimum 10th standard and all other applicants must have passed a minimum 10+2 level of examination. In case of application under open category, the applicant must have passed minimum 10+2 level of examination for rural petrol pumps. For open category applicants other than rural areas, the applicant must have an educational qualification awarded by any of the universities incorporated by an Act of the Central or State Legislature in India or any other educational institution established by an Act of Parliament or declared to be deemed as a University.
Hence, for open category applicants other than rural areas, a Graduation in any field or Chartered Accountant or Company Secretary or Cost Accountant or Diploma in Engineering is required.
To start a petrol pump, the applicant must show the ability to invest a minimum of Rs.25 lakhs in case of regular petrol pumps and Rs.12 lakhs in case of rural petrol pumps. The funds for investment can be in the following forms:
- Funds in savings accounts, deposits with Bank/Registered Companies/Postal Schemes
- National Savings Certificates, etc
- Shares of listed Companies in Demat form
- Mutual Funds
Its important to not that cash, jewelry, etc. for which ownership cannot be established will not be considered. Also, balance in current account will not be considered. For shares, mutual funds and bonds, only 60% of the value will be considered. The valuation certificate for the assets must be obtained either from a Chartered Accountant.
Land is a major criteria in the selection of petrol pump dealers. The applicants are first classified into two groups as follows:
- Applicants having suitable piece of land in the advertised location/area either by way of ownership / long term lease.
- Applicants having Firm Offer for a suitable piece of land for purchase or long term lease.
Based on the above classification, different types of documents must be submitted by the applicant to prove ownership of the Land or intent to purchase. The area of the land must be as per the requirements specified in the advertisement. If the applicant is selected for petrol pump dealership, he/she has to make available the offered land in a developed manner up to the road level by cutting/filling, with good earth, layer-wise compacted as per standard engineering practices. The selected applicant is also required to provide retaining wall and compound wall of a minimum height of 1.5 meters, designed as per site conditions.
The above are some of the major criteria for providing petrol pump license. Applicants satisfying these criteria will be allowed to progress to the next stage, wherein the final decision is made based on a draw or lots or a bidding process.
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