State-owned oil companies have issued letters of intent for more than 9,000 new petrol pumps as part of their biggest-ever expansion of fuel retail network.
The companies are moving quickly to select dealers for new pumps that would help double their retail network in just a few years, serve customers better in less-penetrated micro markets and meet the growing challenge from the private sector.
In November 2018, Indian Oil Corporation and Bharat Petroleum Corporation had launched the process to select petrol pump dealers at about 78,500 locations across the country. Companies received applications for about 95% of locations – single applications for 39% and two or more applications for 56%.
The companies suspended the selection process after the general elections were announced in March but resumed once results were out late May. Two broad categories of pumps have been offered by companies – one, where a dealer is chosen via draw of lots and the second where the highest bidder is selected.
So far, winners for 33,200 locations have been picked up by companies, of which 9,000 have been issued letters of intent and about 110 new pumps are already commissioned, according to people familiar with the matter.
A letter of intent, as the name suggests, contains company’s intent to appoint an applicant as a dealer at a certain location, subject to his fulfilling certain conditions such as developing land on the specified location, depositing security deposit, arranging working capital and securing a bunch of government licences necessary to operate a pump.