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					An Open letter to Petroleum Minister by a Dealer
                                                      July 22, 2010 by petroleumdealers
From
K.Rajasekaran, Nanjappa Enterprises
BPCL Dealers, Coimbatore-641005

To
         Honourable Shri. Murali Deora,
         Minster of P& NG
         Govt of India.

Dear Honourable Petroleum Minister,

At the outset, I congratulate you for being the first Petroleum Minister in the History of Independent
India to take over for the second time.

This is not a simple letter or representation to protect my personal interest.

I morally represent all Petroleum Dealers of Indian PSOC’s.

I belong to a freedom fighter’s family and I named my (open quota) outlet after my freedom fighter
Grandfather Mr.Nanjappan, who took part in the Coimbatore Sulur Airport Conspiracy case of 1942
Quit India movement.

To justify the recent necessary hike in the Petroleum Products, (y)our ministry has released an
advertisement in all news papers which questioned the common man to make him understand the efforts
and pain your ministry is taking to serve the nation. Well indeed, it is well said that in one of the
questions which asked as the people did know that “there are 36000 outlets in every nook and corner
driving the economy of the country”.

Because it is really heartening to note that the ministry is remembering and quoting the Retail outlets at
least at this juncture. Though the advertisement has not quoted the dealer community directly, but as the
RO’s are operated by none other than the Dealers, we are being instrumental in driving the Indian
economy.

Though we, the petroleum dealers are all proud in serving the nation under your leadership, but we
ourselves are not very happy and not doing well.

Being the leader of the ministry which is driving the economy of the country, I would request you to pay
sufficient amount of attention to the condition of the Drivers (Dealers) driving the national economy.

Hence to make you to understand the plight of pathetic Retail Outlet dealers I am putting some questions
to you. Please don’t get offended. I am only trying to make you to understand the intensity of the
problems we are facing. Because you may not be fully aware of the real, empirical situations we are
facing in doing business under (y)our ministry.

1. Do you know that all the RO’s under your ministry are not only providing service to run the vehicles
of the nation, that we invest more on the tax than on the actual cost of the product and remain as one of
the biggest collection source points of income to the exchequers of states and central govts? Hence do
you know that we are working for the customers and whereas our investment is working more for the
governments than for ourselves?

2. Do you know that all RO’s under your ministry are not only providing direct service to the Indian
motorists but working round the clock and functioning as indirect tax collection centers of indirect taxes
to the State and Central governments? And hence the RO dealers are no only routing fuel to the Indian
vehicles but also routing the fuel of tax money to the governments?

3. Do you know that more than 50 % of turn over of the RO’s under your ministry is nothing but various
combinations of import duty, central excise, VAT, road cess etc., levied by central and state
governments?

4. Do you know that all RO Dealers under your ministry are paying tax to the evaporated products,
pilferaged products also? Do you realise that the dealers are making tax payments to the allowable
evaporation loss of 0.6% of the products sold?

5. Do you know that the Level of competition is Very High in our business due to the Maximum
Number of pumps established by all PSOC Companies, who are still making further plans to increase
them by huge numbers?

6. Do you know that the level of pain and effort taken by all RO’s under your ministry across India in
providing real time, instant service?

7. Do you know that no industry demands this kind of non stop real time service of this degree and
dedication except the RO’s under your ministry?

8. Do you know that your dealers practically don’t have any holidays at all?

9. Do you know that your RO dealers are facing the self loss of the products by evaporation, Transport
loss and huge loss by pilferage and no mechanism is updated and approved by your ministry to curb all
these losses despite availability of many technologies to curb these losses?

10. Do you know that we incur very high electrical charges as every litre of product sold is pumped out
using electricity at the cost of RO dealers? And that very high electricity generating expenses met by the
Retail Dealers by using the gensets during the times of load shedding in the RO’ at our costs?

11. Do you know that running the RO dealership under you is the lowest return yielding business which
demands highest level of mandatory services in the country?

12. Do you know that except some high selling RO dealers across the nation, all RO’s under your
ministry are bleeding out of low returns and demanding service at a very high level?

13. Do you know that the RO’s are the places where dealers are working as shock observers between the
government and the public whenever the prices are revised upwards?

14. Do you know that all governments are only used to consider the political, economical impact of the
petro product prices on the people and never considering the same impact on the Dealers?

15. Are you really aware that the rise in the product price means more investment and less income to the
dealer community (as the commission is volume based) but at the same time rise in the product price is
more tax income to all exchequers as the taxation is % based? And (y)our ministry never raised the
commission rate along with the price revision?

16. Do you realise the government never minds and accounts underpricing the diesel cost to the sedan
cars of the riches of the richest and commercial, industrial uses and whereas it is overpricing the petrol
price to the common man using his two-wheeler?

17. Do you realise that (y)our ministry and the entire government, only under political consideration,
remains generously unmindful to the fact of heavy under pricing of the products supplied continuously
to the entire nation but remains unnecessarily stingy towards increasing the commission of the RO’s
which are facing and serving the public in the front end?

18. Do you know that the rate of return in RO’s under your ministry is only 107 paisa (1.92%-
Gross Profit) for Petrol/liter and 63 paisa (1.48 %- Gross Profit) for diesel/liter (as on 1.7.2010)?
Do you know that even the street side beggars who seek alms don’t take it when less than a Rupee
is offered? So do you realise, we the dealers are in a pathetic situation of taking the amount of
money as commission which gets rejected even by the alms seeking beggers?

19. Do you know that the maintenance contractors of pay and use public toilets of local bodies
throughout India is collecting a charge of Rs1/- to urinate and Rs2/- to excrete when using the
toilets, whereas the dealers of PSOC’s investing almost Rs55/- as investment of 1 litre petrol to
earn Rs1/- profit and besides,

a) maintaining the RO toilets in better condition and keep it to serve the motoring public at free of
cost to make use of the toilets?

b) Providing free air to vehicles of all customers irrespective whether they fuel or not fuel at the
respective outlet, which would other wise cost a customer at least Rs1/ tyre for two wheelers and
Rs5/- at least for four wheelers?

c) Provide clean purified drinking water to the motoring public at free of cost where the
considerable section of population would not hesitate to buy the same at a cost of Rs10/Liter

d) Within that meagre profit of Rs 1/- from petrol and Rs0.60/- from diesel, we bear all electricity
charges, labour cost, evaporation loss, pilferage loss of product, maintenance of outlet, telephone
charges and other expenses which have increased substantially in the last one year.

We know that you are the only minister in the history of Independent India who took charge of the
petroleum ministry for the second time in row.

And we are the face of our ministry to the country. Please, do not let us suffer like this any more.

If you don’t address these basic problems of your dealers then who will?

We sincerely hope you will.
We urgently need a significant revision in our commission rates. If you don’t do it now
when our capital requirement is at the historical high and the rate of return is historical
low then when will the revision of commission will happen?

We most humbly request you to please do justice to your dealer community so as to make us to continue
driving the economy of our country in every nook and corner, by fuelling the vehicles as well as
working as indirect collection centers of the indirect taxes to the governments and besides maintaining
the free toilets/free air/free water at (y) our RO’s, though not happily, but at least sustainably.

Hence, I most humbly request you,

1) Please make our business viable by providing fair % of commission matching our investment,
expenses, running costs and variety, quality, quantum of service and dedication.

2) Update and create foolproof delivery mechanism of the Products to the Outlets.

My humblest apologies, if at all I have wounded you by my questions, but all of them rose out of
ground realities and desperate situations of the majority of Petroleum Retail Outlets in the country.
Thanking you,
With highest regards,
K.RAJASEKARAN
09363100279
kumastha@yahoo.com

Posted in Uncategorized | 8 Comments »

Tamil & English Comparison of LPG Vs Retail
November 10, 2009 by petroleumdealers
Tamil- LPG x Retail

Posted in 1 | 3 Comments »



November 1, 2009 by petroleumdealers
 Comparison between LPG Distributorship Business and Retail Dealership Business in India
Study by
K.RAJASEKARAN
NANJAPPA ENTERPRISES
BPCL DEALERS
COIMBATORE-641005
Sl Parameters             LPG Distributor ship       Retail Outlets
No
1    Level of competition Level of competition is    Level of competition is Very
                          Very low. Almost nil.      High.
                                                     Maximum Number of pumps is
                                                     established by all PSO
                                                     Companies.

2     Time available to                 Convenient, Flexible time   Real time, Instant service
      provide service                   available. Can be planned   required. No time available for
                                        with less number of         service. Hence more number of
                                        employees.                  employees required.

3     Free allied value added Almost Nil.                           Free Air/Free Water/
      services                                                      Free Toilet/Free Nitrogen
4    Customer base           Standard. Permanent base Non standard.
                                                      No Permanent customer base.

5    Weekly Holiday          Yes Possible.               No.Alldays, 365 days.

6    Product loss due to     Product is packed.             1.   Product is fluid
     various reasons         Hence Nil Loss.                2.   Self loss by evaporation.
                                                            3.   Transport loss.
                                                            4.   Possibility of loss by
                                                                 pilferage.


7    Labour Involvement      Very high due to indirect   Very low. Due to NIL indirect
                             income of voluntary tips    income to labours.
                             by customers in each
                             transaction.
8    Investment required     Moderate                    Very high.


9    Nature of transaction   Only cash. Standard         By Cash, Credit, Credit card,
                             amount.                     Rewards program card. Hence
                                                         various forms of cash requires
                                                         educated, skilled workforce.
10   Risk of Credit Business NIL                         Very High

11   Business Hours.         Standardised time. Almost Always open. Real time.
                             matching with office
                             hours.
12   Number of Business      One Product in Five sizes. Many products.Petrol,
     products.                                          Diesel,PremiumPetrol/Diesel,
                                                        Lubricants.

13   Risk of Tank Leakage NIL                            YES
     Line leakage

14   Risk of excess delivery Nil                         YES
     during sale

15   Labour availability     Very High                   Very Low.

16   Electricity charges     Very minimum electricity    Very high electrical charges.
                             consumption. Hence very     Every litre of product sold is
                             minimum expenses            pumped out using electricity.
                             incurred by LPG             Very high level of illumination
                             Distributors.               required. Hence very high
                                                         electricity expenses to the Retail
                                                         Dealers.
17   Percentage of           6%                          2.00%
     Profitability           (As on 1.11.2009)           (As on 1.11.2009)
18   Profitability to     Very high due to        Very low due to High number
     Distributors         Minimum number of       of outlets.
     Dealers              distributors for large
                          number of customer base
19 Profitability to stake Almost and Always loss Good profitability in
     holders/shareholders to Companies and to the lubricants, Auto LPG, Petrol,
     of Public sector Oil Government due to the Diesel, Premium Products.
     companies            heavy subsidies. Hence
                          results in under
                          recoveries.
20. Tax income to state No Tax income from        Hefty tax income by sale of all
     and central          domestic connections.   types of fuels. Petrol, Diesel and
     governments          Tax income through      Lubricants are highly taxed
                          commercial cylinders    and maximum income to the
                          only.                   exchequer.
Dear Dealer friends,

From the above 20 compared parameters, it is evident that our retail business, which is facing lot of
operational costs, difficulties yields very very lower returns of 2% on our investment

But the LPG Distribution business, which is not facing much operational costs, difficulties when
comparing to our business yields very high returns of 6%.

Our operational difficulties are very high.

The irony is both are under One Ministry under government of India.

What could be the reason for this kind of disparity?
I found one conspicuous reason.

LPG Distributors are united. We, the retail dealers are not.

Their federation is united and their leaders are thinking above their ego and working for the welfare of
the members of the federation.

Our leaders should work enough to bring about at least parity in profitability with LPG
Distributors.

Our leaders should compete with each other to perform.

Let us begin a debate online about how to bring about unity among us and resolve the disparity.

I request all dealer friends to post their views. Let us share our views. So that we can strengthen the
interest group so that we can proceed further.

Thanking you,
With highest regards,
K.Rajasekaran , kumastha@yahoo.com, 09363100279

				
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