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How to Start a Petrol Pump Business and Secure Financing for It

Know how to start a petrol pump business with market analysis, investment requirements, and a plan for securing financing.

The petrol pump business is one of the most lucrative business models across the world. The growth of transportation and personal vehicles has caused an increase in the demand for this business. Establishing and running a petrol pump business might seem  challenging to many. 

However, given the number of formalities and administrative procedures involved, the returns far outweigh the efforts. To maximise profit from the business, you need to have a detailed petrol pump business plan.

Understanding the process and developing your own plan based on it is essential for ensuring a successful venture in the long run.

What are the Different Types of Petrol Pumps

There are two types of petrol pumps based on the service they provide to customers:  

Full-Service Petrol Pump

These petrol pumps have attendants who assist in refuelling the vehicle. They fill petrol, check the oil, and help with the payment process. This type is common in India and is beneficial for those who require assistance. 

Customers only need to specify the amount of petrol needed, and the attendants handle the rest.  

Self-Service Petrol Pump

At these petrol pumps, customers are responsible for refuelling their vehicles, checking the oil, and cleaning the windshield. These are not very common in India. Some locations offer both types, allowing customers to choose their preferred option.

Step-by-Step Guide to Starting a Petrol Pump Business in India

Petrol pumps are a highly regulated industry, and there are a number of steps involved in starting a business. 

Here’s a breakdown of the steps involved in starting a petrol pump business:

1. Make a Business Plan

To start any business, you need to make a thorough business plan that is sustainable in the long run. You also need to take into account all your unique advantages and disadvantages. The key points of your business plan need to include:

  • Follow the regulations established by oil companies and the government

  • Conduct research on the type of pump to operate

  • Assess investment requirements and explore financing options

  • Obtain the necessary licences and permissions

  • Apply for a dealership with major oil companies

  • Construct the petrol pump and recruit staff

  • Select a strategic location for the business

  • Purchase the required equipment and supplies

  • Arrange fuel deliveries from the oil company

  • Implement promotional strategies to attract customers

2. Know the Eligibility Criteria

The Government of India has set certain rules for opening a petrol pump. You must meet these requirements before starting the process:  

  • The applicant needs to be an Indian citizen; Non-Resident Indians (NRIs) need to provide proof of residing in India for at least 182 days

  • The applicant has to be between 21 and 55 years of age

  • A birth certificate is required during the application process

  • For the rural area, you must have passed the 12th grade

  • For urban areas, you must have a university degree from a UGC (University Grants Commission)- recognised university

  • If you belong to the freedom fighter category, you are exempt from these academic requirements

  • You must invest minimum ₹15 Lakhs for a dealership in a rural area and ₹2 Crores in an urban area

  • The location of the pump should not be in a restricted or blacklisted area

3. Source Funds

Opening a petrol pump dealership requires a significant investment. The funds you invest play a crucial role in determining the success of your business. To establish a petrol pump in a rural area, a minimum investment of ₹15 Lakhs is necessary. In urban locations, the required amount is higher, from ₹25 Lakhs or more if the land is owned. 

Besides cash, you can arrange funds from:  

  • Savings accounts 

  • Bank deposits 

  • Bonds and shares

  • Business Loans

  • Fixed deposits 

  • Mutual funds 

  • National Saving Certificates 

  • Postal saving schemes

4. Study Competition

In order to be more strategic and make informed decisions that are instrumental to your success, it’s important that you study your competition. This can be a great way for you to understand the business model a little bit better. 

This will also help you recognise a number of opportunities that you can seize while also giving you an idea of the potential mistakes to avoid for success. This will help you to position your business for growth and success.

5. Find Ideal Land for your Business

Since this business is land-intensive, it’s important that you choose a piece of land that is compatible with the petrol pump business model. Highways, main roads or roads where there is demand for petrol pumps can be ideal. 

You also need to meet these land requirements to set up a petrol pump:  

  • You need to own the land or lease it for the period specified by the oil company

  • You have to prepare all legal documents for verification

  • The land needs to be constructed to ensure easy access from the road

  • For rural areas, a minimum of 800 square metres is required for a single dispensing unit and 1,200 square metres for two dispensing units

  • For urban areas, a minimum of 500 square metres is required for a single dispensing unit and 800 square metres for two dispensing units

  • On national highways, a minimum of 1,200 square metres is required for a single dispensing unit and 2,000 square metres for two dispensing units

Registration and Licencing for a Petrol Pump Business

To operate a petrol pump efficiently, obtain the following approvals:

Location’s Certified Copy

Authorities legally recognise the petrol pump location, serving as proof of its existence and authenticity. Obtain this document from the local land records office or the municipality.

No Objection Certificate (NOC)

Acquire clearance from the licensing authority. This ensures there are no legal objections to the operation of the petrol pump at the designated location.

Necessary Permissions

Secure approval from the Municipal Corporation and Fire Safety Office to ensure safe operations. These permissions confirm adherence to local safety regulations and environmental guidelines.

Certification and NOC from Authorities

Comply with all regulatory requirements by obtaining the necessary certifications and approvals.

Cost of Opening a Petrol Pump

Opening a petrol pump in India requires significant investment, influenced by factors such as the city tier, location, fuel tank setup, and licensing fees.

Here is a comprehensive cost breakdown to guide your planning:

City Tier Estimated Investment Range Key Considerations

Tier-1 Cities (e.g., Mumbai, Delhi, Bangalore)

₹50–100 Lakhs

Higher real estate costs, premium setup for fuel tanks, higher safety and licensing fees.

Tier-2 Cities (e.g., Pune, Jaipur, Surat)

₹30–60 Lakhs

Moderate real estate and fuel tank setup costs, steady growth potential.

Tier-3 Cities (e.g., Bhopal, Varanasi, Agra)

₹15–40 Lakhs

Lower overheads, suitable for budget-friendly pump setups.

Disclaimer: The cost estimates mentioned above are based on general industry averages and may vary depending on the specific location, fuel tank setup, and regulatory requirements. Actual costs may differ, so it is advisable to conduct a detailed market survey and consult with local experts before finalising your budget.

Cost Breakdown by Category

  • Land and Location

Rent and land acquisition costs will vary based on the city tier and location. In Tier-1 cities, commercial land costs tend to be the highest, while Tier-3 cities will have lower rent costs.

  • Fuel Tank Setup and Equipment

Setting up fuel tanks and installing dispensing pumps, storage facilities, and related equipment can range from ₹20–40 Lakhs, depending on the size and capacity.

  • Licenses and Permits

Obtaining necessary licenses from local authorities and safety certifications, including pollution control measures, could cost between ₹2–5 Lakhs, depending on the region’s regulatory framework.

  • Safety Measures

Installation of fire safety systems, spill control measures, and other safety equipment may range from ₹5–10 Lakhs, considering the safety standards required for fuel storage.

  • Inventory and Operational Costs

The initial cost for petrol/diesel inventory and operational expenses, including salaries, utilities, and maintenance, could range from ₹10–20 Lakhs.

  • Marketing and Branding

Initial expenses for promoting the petrol pump, including signage, advertising, and customer loyalty programs, could range from ₹50,000 to ₹1 Lakh.

Financial Planning and Securing Financing for Your Petrol Pump Business

Financial stability is essential for achieving long-term success in your business. It is important to plan investments carefully to avoid errors and prevent financial losses. Securing financing for a petrol pump business involves both careful financial planning and understanding the various funding options available.

Here’s how:

Financial Planning

Before seeking funding, it’s crucial to have a detailed financial plan. This should include a breakdown of costs such as land acquisition, equipment setup (fuel tanks, pumps, etc.), regulatory fees, and operational expenses. Accurate budgeting and cash flow forecasting will help ensure you have sufficient funds at every stage of the business setup and avoid financial challenges later on.

Securing Financing

To finance your petrol pump business, you can explore government schemes, bank loans, and financial institutions. Government schemes like PMEGP and MUDRA Yojana are great options for small business owners looking for affordable financing. Additionally, banks and NBFCs offer loans tailored to petrol pump setup and operations. A solid CIBIL score and business plan will increase your chances of securing favourable loan terms.

Uses of a Petrol Pump Business Loan

A business loan can help you establish a petrol pump if your budget exceeds initial estimates. Financing can assist in covering the following expenses:

  • Initial Costs: Purchasing and obtaining permits for land, as well as constructing the petrol pump

  • Ongoing Expenses: Fuel procurement, employee salaries, maintenance, electricity, water, and other utility bills

  • Equipment: Fuel dispensing pumps, storage tanks, and other essential machinery

Benefits of a Business Loan

A petrol pump business loan from a reputed lender will help you cover essential initial costs. These loans are designed to meet the financial requirements of both new and experienced business owners. Here are the advantages you will receive:

  • You will receive quick funds for your requirements as the approval and disbursal process for a business loan is faster than other borrowing methods

  • You need to submit minimal documents to secure a high-value loan, as some banks approve loans based on your credit history without requiring collateral

  • Explore various loan options to select a repayment plan that aligns with your financial capacity

  • Lenders compete to attract borrowers, leading many to offer lower interest rates to stand out

Business Loan Offers and Interest Rates by Various Lenders on Bajaj Markets

You can secure a high-valued loan on Bajaj Markets. Simply compare different lenders and apply with minimal documentation. 

Here is a list of business loans you can compare to find the one that suits your needs best:

Disclaimer: The mentioned rates are subject to change at the lender’s discretion.

Documents and Eligibility Criteria for a Business Loan

To apply for a business loan from Bajaj Markets, you need to meet specific eligibility criteria related to nationality, age, creditworthiness, business status, and financial records. 

The key requirements are as follows:

Eligibility Criteria

  • Employment: You need to be self-employed, either as a professional or non-professional

  • Citizenship: You must be an Indian citizen

  • Credit Score: A good CIBIL score is required

  • Company Type: Your business needs to be registered as a private limited company, partnership, or LLP

  • Business Vintage: Your business must have been operational for at least one year

  • Turnover: Your minimum annual turnover needs to be ₹1.5 Lakhs, as reflected in ITR records

  • Age: Your age should be between 21 and 60 years

Documents Required

  • Identity Proof: PAN card, Aadhaar card, passport, Voter ID, or driving licence

  • Address Proof: Aadhaar card, lease agreement, utility bills, or passport

  • Income Proof: Last six months' bank statements, income computation, Profit and Loss (P&L) statement, ITR with certified details, and balance sheets for the past two years

Credit Score and Company Credit Report (CCR) for Petrol Pump Business Loan

When applying for a petrol pump business loan, the eligibility criteria vary based on whether you're applying as an individual or a company. Individuals must provide a CIBIL score, while businesses need to submit a Company Credit Report (CCR) rating.

Here are the scores and ratings required to secure a business loan: 

For Individuals (Sole Proprietors/Freelancers)

If you are applying as an individual, your CIBIL score will be evaluated. The CIBIL score ranges from 300 to 900, and a score of 750 or above is typically required to secure favourable business loan terms.

For Companies (Registered Business Entities)

If you're applying as a registered company (such as an LLP, Pvt Ltd, or partnership), you will need to provide your Company Credit Report (CCR). The CCR rating ranges from 1 to 10, and a CCR rating of 1-3 is considered ideal for securing a business loan. 

A strong CCR rating indicates low financial risk and will increase the chances of securing a loan for setting up or expanding your petrol pump.

How to Apply for a Business Loan on Bajaj Markets

To get a business loan for your petrol pump, follow these simple steps:

  • Click on the ‘Check Offers’ button

  • Fill in the required details in the application form

  • Choose the loan amount and repayment period that works best for you

  • Click ‘Submit’ to complete the verification process

Schemes Offered by the Indian Government for SMEs/MSMEs

The Indian government provides various schemes that support Small and Medium Enterprises (SMEs) and Micro, Small, and Medium Enterprises (MSMEs), including businesses in the petrol pump sector. These schemes, available at both the central and state levels, are designed to provide affordable financing options for setting up or expanding petrol pump businesses.

Here’s a table with some of the schemes you can explore:

Scheme Name Scheme Type Loan Amount

PMEGP (Prime Minister’s Employment Generation Programme)

Central

₹10 Lakhs (urban), ₹5 Lakhs (rural)

MUDRA Yojana (Micro Units Development and Refinance Agency)

Central

Up to ₹10 Lakhs

CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises)

Central

Up to ₹2 Crores

State Financial Corporations (varies by state)

State (varies by state)

₹5 Lakhs – ₹50 Lakhs

Uttar Pradesh Financial Corporation (UPFC)

State (Uttar Pradesh)

₹10 Lakhs – ₹5 Crores

Maharashtra State Finance Corporation (MSFC)

State (Maharashtra)

₹5 Lakhs – ₹50 Lakhs

Disclaimer: The loan amounts and scheme details provided above are indicative and may vary based on eligibility criteria, location, and specific government policies. You should check with respective authorities for the most up-to-date and relevant details.

Conclusion

With careful planning and effective financial management, you can operate a successful petrol pump business. Land, construction, and staffing require a significant investment. A loan for opening a petrol pump will help cover most of these expenses.

You need to choose a flexible repayment period based on your income flow and focus on expanding your petrol pump.

Frequently Asked Questions

How much does it cost to start a petrol pump business?

The cost to start a petrol pump business depends on various factors like the location (city tier), size, and brand of the petrol pump. The overall investment can range from ₹15 Lakhs to ₹1 Crore or more. This includes land acquisition (or lease), installation of fuel tanks, infrastructure, safety and licensing fees, and other operational costs.

  • Tier-1 cities (e.g., Mumbai, Delhi) will have higher costs due to real estate and infrastructure requirements.

  • Tier-2 and Tier-3 cities will be relatively less expensive due to lower land and setup costs.

Additional services such as convenience stores, car washes, or oil changes can also increase investment costs but can improve profitability.

A petrol pump business can be profitable, but it depends on factors like location, fuel demand, and supplementary services offered (e.g., convenience stores, car washes). Profit margins on fuel sales are relatively low, but the non-fuel income (from convenience items, car services, etc.) can significantly boost profits.

  • High-traffic locations like highways or urban areas tend to be more profitable.

  • However, profitability can vary and depends on fuel sales volume, operating costs, and local competition.

Yes, loans for petrol pump businesses are available through various government schemes and financial institutions. Key options include:

  • PMEGP (Prime Minister’s Employment Generation Programme): Provides funding for setting up small businesses, including petrol pumps, with a focus on generating employment.

  • MUDRA Yojana: Offers loans for small businesses (up to ₹10 Lakhs) for setting up small-scale businesses, including petrol stations.

  • CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises): Offers loans for small enterprises, including petrol pump operators, with minimal collateral requirements.

  • State Financial Corporations: Many states offer specific loan schemes for setting up petrol pumps.

Banks and financial institutions will also provide loans for petrol pump setups, but applicants need to have a good CIBIL score, a solid business plan, and meet other requirements such as land ownership or lease.

Eligibility for a petrol pump license is governed by oil marketing companies (OMCs) like Indian Oil, Bharat Petroleum, and Hindustan Petroleum, in coordination with PESO (Petroleum and Explosives Safety Organisation). Key eligibility criteria include:

  • Indian citizenship: Applicants must be Indian citizens.

  • Age: Applicants must be at least 21 years of age.

  • Land availability: Applicants must own or lease land where the petrol pump will be set up.

  • Financial ability: Applicants should have the necessary funds to meet the investment and operational costs.

  • Compliance with regulations: Applicants must comply with safety standards, including infrastructure, environmental concerns, and fuel storage regulations set by PESO.

The process also involves application submission to OMCs, which conduct interviews and inspections before granting the license.

There are a number of Oil Marketing Companies (OMCs) that you can choose from, depending on your priorities and needs. To choose an OMC that’s ideal for you, do a thorough analysis of all relevant OMCs and map out their pros and cons to arrive at your preferred OMC.

Petrol pumps are profitable in India and many other countries. Dealers earn approximately ₹1.5–₹3 per litre for petrol and ₹2–₹3 per litre for diesel.

The cost of acquiring a license for a petrol pump in India varies based on the state and location. Typically, the fee can range from a few lakhs to several crores.

In Company- Owned Dealer-Operated Petrol Pump, the dealer leases their land to a company, the company then makes the investment. Whereas in the case of Dealer-Owned Dealer-Operated Petrol Pump, the dealer provides the land and also makes infrastructure investments.

Setting up a petrol pump in India can be a lucrative opportunity for business owners due to the following benefits:

  • High profit margins on fuel and additional services

  • Steady cash flow from consistent fuel demand

  • Government support through incentives and subsidies

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