Due to the overwhelming amount of queries we keep getting , we have set out a basic guide for setting up a petrol pump in Pakistan.If you wish to Open a Petrol Pump, then please DO NOT call us.Instead please try to google the marketing companies like Shell, PSO etc for more information as they all have their own requirements.We will not give out numbers or contact representatives of Marketing Companies, as this is not our job.
There are several factors to consider when proposing to open a petrol pump station in Pakistan in terms of both commercial viability and future success.
- The location of the land and the pumps,
- Engaging the services of quality legal and financial teams,
- Endeavour to offer the best services and use the best technology currently available.
Keeping in mind the current structure of the market, the most important of these factors to give you the best chance of success is providing the best possible quality of service to your customers to gain a competitive edge.
Petrol Pump Set Up in Pakistan
The Opportunities Available
- A population growing at a rapid rate, the income per capita and the sheer number of cars and other vehicles now in the country.
- The low pressure of gas gives you a diesel and petrol filling station a distinct advantage over a CNG station, especially during the winter.
- The increase in demand for all petroleum products even in bordering countries, especially Afghanistan.
- This demand for all petroleum products is elastic in nature, thus making it constant.
- The exploration for multiple oil sources.
The Legal Status of the Proposed Business and the Viability of Sharing
The proposed structure of this business entity, from a legal point of view, is that of a franchise with either solo or joint proprietorship. Whilst this selection is dependent upon what choice the entrepreneur makes, the feasibility report is typically based on the franchise having a single owner.
The Joining Fee and the Security Deposit
In order to be able to join an OMC as a dealer/retailer the entrepreneur is required to pay both a joining fee and a security deposit. The joining fee will usually be around Rs.100,000 whilst the security deposit will cost around Rs.300,000 (these fees keep varying and changing over time).
The Franchise Fee
The franchise fee is payable regularly to the OMC. This fee is usually around 0.10-0.15Rs on every litre of petroleum the company has supplied. This is set off however by the fact that all the equipment, machinery and subsequent maintenance is taken care of by the OMC and does not come out of the franchisee’s pocket.
Additional facilities such as the aforementioned car wash, tuck shop and tyre shop can also be installed on the same basis. The fee for the car wash and the tyre shop is charged at around 0.02-0.03 rupee per litre.
*These fee estimates are only intended as guidelines and can vary depending on what agreement is made between the OMC and the franchisee. Also , with time these estimates get revised.
The Franchisees Profit Share
In the same manner as the OMC, the franchisee also gets a share of the profits on the sale of every litre of petrol or diesel. This percentage is both decided and the regulated by OGRA; the Oil and Gas Regulatory Authority. The percentage of this share will usually remain the same but the value can vary from between 0.85-1.50 rupees per litre of petrol and around the same for diesel.
The Licensing Process for the Franchise’s Retail Outlet
LICENSING PROCESS FOR RETAIL OUTLET (FRANCHISE)
The process of opening up a fuelling station includes few essential steps that need to be followed in order to full fill the criteria of oil marketing company (OMC) as well as the government.
An entrepreneur interested in franchisee business submits a written application (expression of interest) to an oil marketing company (OMC). The applicant requests the OMC to asses the feasibility of his land for the purpose of retailer ship of their petroleum & lubricant products.
After Initial survey OMC scrutinizes the applicant on the bases of his credibility (both social and financial), & skills, and then a feasibility study is conducted by the OMC’s expert to measure the viability of applicant’s land with respect to its location. After fulfilling the feasibility criteria for the project the OMC signs a retailer ship agreement with the applicant and acquire his land on rental lease for the period of minimum 15 years. The rent is just a nominal amount based on the location of the land.
No Objection Certificates (NOCs)
After signing the agreement the OMC’s architects draw a map for the sight representing the anticipated structure of the sight as per the national standards. The application is then submitted to the district coordinator officer (DCO) along with the map in order to acquire a no objection certificates from the concerned departments for this project. The DCO calls a consultative meeting including the representatives of the concerned departments to critically analyze the project and share if they have some objections or not regarding the project. With the view of all the representatives regarding the project the DCO issues a no objection certificate for the prescribed project.
License of Explosives
The explosives department is a supreme authority for issuing a license to store or sale the explosive (petroleum) items. The OMC finally submits the application to the department of explosives for the grant of license. The application includes NOC and the sight map issued and approved by the DCO respectively.
After the permission of explosives department the infra structure construction is to be started according to the approved map. The cost of infra structure is shared between the entrepreneur and the OMC. The company totally pays for the machinery and equipment and the civil work is the responsibility of entrepreneur. After the completion, the sight is inspected by an expert engineer of OMC. The sight constructed according to the standards qualifies for the certificate of “safety and completion” issued by the OMC’s engineer.
Grant of License
The last and final step is the sight inspection by the inspector of explosives from the explosives department. The inspector critically inspects the site (specially the fuel storage tanks) according to the pre defined rules of explosives department and grants the license to the franchisee (entrepreneur) to start his business.
The annual sales capacity of the station should ideally be 2.85 million litters of petrol & diesel, based on double-shift services. For financial projection Capacity utilization will be 80% in the first year; and increased at a rate of 5% annually and will be capped at 95%.
The total land requirement would be of 15,000 Sqfts. to install various facilities of the project, inclusive of car wash, tire shop and office building.
The Fuelling Station is recommended to be installed next to the populated area while considering other mandatory inputs i.e. availability of human resource, electricity and water etc. for the purpose, a location in the main city would be feasible to make sure a healthy number of populations is around the fuelling station along with the compulsory infra structure.