Most Pakistani petrol pumps have workers holding a bundle of cash. The tale isn’t about unfair wages but how fuel pumps earn money.
Several factors influence the price of fuel in the country. The earnings received by a dealer are known as merchant margins (or pump margins in this context). Previously, percentages were utilized, but now they are fixed per liter.
What Is the Income From Petrol Pump Businesses in Pakistan?
Pakistanis have been queuing for fuel at petrol stations for the past week. They couldn’t fill up since the pumps were on strike. A company-owned pump was the sole means to receive Petrol; there were only a few dealer-owned pumps. In Karachi, for example, only 20 pumps are operated by the firm. Dealers or strikes manage the rest.
The Pakistan Petroleum Dealers Association (PPDA) has declared a strike to demand a more significant margin on petroleum product sales, which will begin on Thursday and last indefinitely.
Due to the petrol strike, the government, according to the minister, will not accept specific petroleum merchants’ “illegitimate demands.”
“The government would not hike petroleum prices by Rs9 per liter just to appease a few corporations,” he remarked.
Let’s Talk About Some Factual Stats Related to Petroleum
Petrol cost Rs3.91 per liter at petrol stations, while diesel cost Rs3.30. Petrol stations earned 2.75% per liter, which the Pakistan Petroleum Dealers Association (PPDA) recommended be increased to 6%. If this demand is reached, petrol pumps will get Rs8.75 per liter, and diesel pumps will earn Rs8.5 per liter.
Petrol will now be charged at Rs 4.90 per liter due to the government’s discussions with merchants. This amounts to an increase in fuel margin of 99 paisas and high-speed diesel margin.
“The proposal for a 25pc increase in the margin will cover all delays in margin revisions in the past and alleviate the impact of inflation on dealers,” said the Petroleum Division.
The ECC resolved in 2016 that margins would be revised yearly by an average CPI Consumer Price Index portion. In 2019, the regulation remained the same for this average change. Over the last five years, the margin has only been altered four times for Petrol and three times for diesel.
Every time, strike action has been threatened. Petrol’s most recent margin revision occurred in April 2021, 9 months after the last revision. For the last few months, the administration has been delaying the adjustment by saying that the PIDE report would be used to revise margins. Even though the study is complete, the government has yet to be willing to alter rates. Aside from that, given the impending fuel crisis in June 2020, the government’s relationship with petrol pumps might be more beneficial. Although inflation remains a problem, and fuel prices are growing globally, the government believes it must respond responsibly and appropriately.
Components of Petrol Prices
- Ex-depot pricing at stations is calculated by combining the components of the Petrol price. Depending on whether the oil is imported or produced domestically, the base price is either the import price or the ex-refinery price. Then there are retailer and freight costs and inland freight equalization margins. OMC profit margins (the money earned by company-owned pumps) and dealer commissions (what petrol pump owners make). The process concludes with taxes, which include the regular sales tax and the petroleum development levy.
- The cost of delivering crude oil from the source to the refinery is the next substantial contribution to a refinery’s inland freight equalization margin (IEFM). Transporting the finished product to other depots is also included in the cost. This category contains internal transportation expenditures.
- A refinery’s inland freight equalization margin (IEFM), the cost of transporting crude oil from the source to the refinery, is the next significant addition. The cost of transporting the finished product to various depots is also included. Transport costs within the company are included in this category.
- Prices increase in Petrol throughout the country are managed through this margin. A massive pile of money is collected from this margin. The government uses this money to provide indirect subsidies to Pakistanis to ensure that fuel prices are the same all over Pakistan.
- Petrol prices in Karachi would be lower without this subsidy. At the same time, they would be higher in almost every other part of the country, including Balochistan and Gilgit-Baltistan.
Depots By JPPL in Pakistan
JINN Petroleum has settled two depots to fulfill the basic petroleum requirements. One is located in Sahiwal, Punjab, and the other in Hub, Balochistan.
Petroleum Retail Network
Retail marketing is a core focus of the company. This segment operates as both the volume and profit driver of the business and acts as the growth engine for the company.
The main focus is on the development of a strong retail segment that focuses on developing petrol pumps at key locations and adding valued business partners. The journey has already started with establishing a retail network in different provinces and parts of Pakistan.
GSTs & Petroleum Industry
We finally come to taxes because the general sales tax (GST) and the petroleum development levy are added to the Petrol station price after all these tools.
After these instruments, the general sales tax (GST) and the petroleum development levy are applied to the petrol station pricing.
The GST is fixed at 0% to alleviate growing fuel prices. It was previously set at 17%. Because it’s a ratio, it fluctuates with the cost of gasoline—the government levies a duty based on a rupee value per liter. Nonetheless, the premium is fixed per liter.
It is intended to counteract increases in import prices and fuel expenses to stabilize petroleum prices. During an election year, however, the levy is often used to alleviate customers or produce additional revenue. The one-time fee of Rs15 per liter has now been increased to Rs30 per liter.
When it wants to ease customers, the government could maintain a fee of zero rupees or a low number. As a result, if all expenditures are considered, the government may raise fuel prices to Rs30.
The government could keep a levy of zero rupees or a low number when it wants to relieve consumers. Therefore, the government could increase fuel prices to Rs30 after all the costs are added.
Petrol Pumps and its types
There are two kinds of petrol stations: company-owned and dealer-owned. A dealer-owned petrol pump is created when an individual obtains a “franchise” of a petrol pump, completes all legal processes, and sells fuel for an OMC. Dealership margins allow them to profit.
How much a pump earns is determined by the amount of fuel sold. Pumps also make money by selling lubricants and providing other services, including tire puncture stations, car wash facilities, and stores.
Did You Know How Petrol Pumps Earn?
Your earnings are determined by the type and quantity of stations you operate and their location. Still, you can expect a potential annual income of PKR 2,500,000 to PKR 3,500,000 (for a single site) from year one, with the prospect of other revenues if you exceed expectations.” JINN petroleum makes petrol pump investment in Pakistan much easy.
While these figures are not guaranteed, the firm you contract with will supply fuel and training if you create a fuel station. In exchange for your investment and time, you will earn your margin and maybe a bonus or remuneration if you exceed sales targets. Even though fuel prices contribute to inflation, inflation and the cost of doing business have increased for pump owners.
If you are looking to invest in petrol pumps, JPPL is the safest choice to invest in. Together, let’s make a well-developed economy.
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