Mumbai: Land availability may turn out to be the biggest hurdle in an ambitious plan by state-run oil marketing companies (OMCs) to open close to 80,000 petrol pumps in the next three years, according to company officials. The firms may end up opening no more than 15-20% of the 79,770 sites advertised last month in what is their first expansion of fuel retail network in four years, the officials said.
Indian Oil, HP and BP’s plan to open 80,000 petrol pumps hits land hurdle
Of the proposed number, Indian Oil Corp. Ltd () plans to open 37,971 retail outlets, and Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) around 16,000 each. “Given the strike rate of around 15-20%, we may only be able to set up 13,000 petrol pumps in the next three years,” said a senior official from an OMC, seeking anonymity. “A low strike rate is because getting permissions for land approval is the biggest impediment in setting up a petrol pump. More often than not, land is not approved and even if it is, in many cases it goes into litigations,” the official said.
Indian Oil currently has 27,185 petrol pumps, HPCL runs 15,127 and BPCL operates more than 15,000.
“Setting targets is not a problem. The issue comes in selecting land parcels for them. After we advertise, our panel will check if the dealer land is at a feasible location. We will then seek a statutory no-objection certificate from over a dozen agencies involved. It’s only after that, that the process of setting up a retail outlet begins,” said a second official from an OMC.
OMCs segregate retail outlets into A&B sites. An “A” site outlet is where OMCs take land on lease and install the infrastructure. Dealer-owned “B” site outlets are where the land and infrastructure are arranged for by dealers and OMCs only provide for the underground fuel storage tank, dispensing pumps and signages.
Analysts do not share the enthusiasm of OMCs in growing their retail presence.
“Given the government’s push towards a gas-based economy and advent of electric vehicles (EVs), fuel retail expansion may not be the best move. Though expanding compressed natural gas (CNG) and EVs may still be a few years away, petrol pumps are not set up with a short-term view,” said a Mumbai-based analyst with a domestic brokerage.
City gas distribution (CGD) network is expected to see an investment of ₹1.1 trillion over the next decade.
At present, 31 firms are developing CGD networks across 81 locations in 21 states and Union territories. The central government, which plans to provide 10 million piped natural gas (PNG) connections, has introduced stringent emission levels for vehicles and plans to develop green corridors to reduce the carbon footprint.
“CNG as an alternative fuel is showing significant growth, but keeping in mind the large number of existing vehicles that are operating on conventional fuels like petrol and diesel, it is expected that the demand for conventional fuels is likely to be sustained in the near future. Further, the option of adding CNG facility at fuel stations, as is being currently undertaken, is always available,” said Indian Oil in an emailed response.
The OMCs plan to expand in Tier-II and Tier-III cities as well as rural areas. In urban areas, they have reached saturation point.
Under OMCs’ revised rules for dealership, introduced this year, the required educational qualification for a new dealer has been lowered to Class X from the previous requirement of being a graduate, and the age limit has been raised to 60 years from 45 earlier. The new dealerships would be alloted on the basis of a lottery system introduced in 2014 for more transparency.
OMCs already follow the lottery system in allotting dealerships for liquefied petroleum gas, or LPG.