By Siddhartha Bhatnagar
You would have been surprised at the title of the story, as petrol pumps are profitable businesses with good returns. However, gone are the days when the owners of these pumps were satisfied with decent earnings. As rural penetration in the urban world increases with job openings and the service sector contributing nearly 56% of the GDP, land prices have become sky high. This has tempted many owners of petrol pumps in Metro cities i.e. Delhi, Mumbai, Chennai, Bangalore and Kolkata to sell their primary centrally-located pumps to the real estate players for the building of malls, residential complex etc.
OMCs (Oil Marketing Companies) in India are already facing problems of late payment of under recoveries and this new trend of selling has triggered panic among the companies. As per the contract with these companies, after the expiry of contract, petrol pump owners are free to use land for any purpose without any liability. There are many pending court cases and studying the time frame of disposal off of such cases, the future looks bleak. Companies even understand that the sheer will of the dealers cannot be broken even though there are plenty of court cases between the company and dealer running parallel. Owners of the pumps find selling of pumps more lucrative due to windfall profits, rather than carrying out operations as pump owner. Soon, you will find that the commuter may have to travel to outskirts to refuel their vehicles and this will add to the burden on the consumer who is already facing the heat of rising petrol prices.
Well, sudden situations and mammoth problems give rise to a new business opportunity. It is too early to say, but City Gas Distribution Players in Mumbai are trying to capitalize on this situation. CGD has an advantage of 24 hours gas pipeline connectivity to a plethora of societies. An experiment was conducted by a CGD player, which provides a special pipe to fill gas in gas kits of your car at night. Though there were challenges of pressure maintenance, results look encouraging. The monotony of long queues and traffic is lessened with this innovative experiment, which also provides an alternative solution to the decreasing number of petrol pumps in a city like Mumbai. Well, the experiment does face operational challenges but provides a lesson on how to capitalize on this upcoming new problem and a new opportunity for CGD to grow; certainly something to smile about for players in CGD.
Soon a plan may be floated by OMCs to all its existing and new petrol pump owners to tackle such a situation by introducing more stringent contracts. Well, it seems pretty difficult to retain the large number of pump owners of metro cities who are attracted to exponential land prices. You may find in the near future that malls and daily necessity shops will be much more in action, with petrol pumps now situated on the outskirts of the city. Petrol pumps will try to facilitate the customer by also having the malls and shops in its pump complex. Customers will plan to travel to the outskirts to refuel and will try to include more activities like buying of ration, clothes etc in the petro complex. Thus, the concept of non-fuel retailing which has not blossomed in India will come into the picture.
There is a possibility of two different outcomes in the near future, but the problem faced by OMCs raise an alarm and provides an outlook on challenges every business faces in turbulent times. Time will decide how companies cope with this unique problem of retaining existing petrol pumps .
He is currently pursuing MBA in Energy and Infrastructure from School Of Petroleum Management, Pandit Deendayal Petroleum University Gandhinagar, Gujarat. He has completed B.Tech (I.T.) from Jaypee University of Information Technology, H.P. and was engaged with Infosys as Senior Systems Engineer. He believes India is energy scarce country and it needs personnel who can understand the complexity in this secto. A deep research mindset, voracious reading, and ability to simplify things will prove handy and that is where his contributions incline.