How to Start a Petrol Bunk: Dealer Commission, Land, Investment and a Monthly Profit Worked Out

A petrol bunk is one of the most visible businesses in any town: open from early morning to late night, handling lakhs of rupees in cash and UPI every day. That turnover is misleading. The fuel belongs to the oil company's price chain, and the dealer earns a fixed commission on every litre. Understanding that one fact shapes everything else about the business.

How a petrol bunk earns

The oil marketing company (OMC), such as Indian Oil, Bharat Petroleum or Hindustan Petroleum, sets the retail price. The dealer buys fuel from the OMC, sells it at that price and keeps the dealer commission.

The commission rates published by the Petroleum Planning & Analysis Cell, effective 1 December 2024:

In rupees per litre, that is roughly ₹3.6–4 on petrol and ₹2.5–2.9 on diesel. With petrol at ₹107.76 and diesel at ₹99.55 in Chennai in late October 2026, the dealer keeps only about 3.4% of the petrol price and 2.6% of the diesel price.

Other income is small but useful: margins on lubricants and engine oil, and at some outlets a convenience store, CNG or EV charging.

How dealers are selected

You cannot simply open a petrol bunk where you like. The OMCs advertise specific locations, and you apply for one:

• Eligibility: Indian citizen resident in India, aged 21 to 60, at least 10th standard pass, with a PAN.
• Dealer-owned sites: the applicant offers land (owned or on a long lease) and the allotment is by draw of lots among eligible applicants.
• Corporation-owned sites: the land is the OMC's, and allotment is by bidding, with a minimum bid of ₹30 lakh for regular and ₹10 lakh for rural sites.
• Reserved categories: some locations are reserved for SC/ST, OBC and other groups, with lower fees; certain reserved sites do not require the applicant to bring land.

Reserved categories pay lower application fees and deposits. The exact land size, frontage and estimated investment for each location are given in its advertisement.

Land

• Size: typical urban sites are about 800–1,200 sq m, highway sites 1,200–2,000 sq m; national highway fuel stations can need more, with wide frontage.
• Lease: leased land generally needs a registered lease of at least 19 years 11 months.
• Title and conversion: clear title, and conversion to non-agricultural use where needed, at the owner's cost.
• Location matters more than size: a corner on a busy road or a highway with heavy truck traffic sells several times what a quiet street does.

A worked example: one outlet, one month

Our own illustrative assumptions for a dealer-owned outlet in a Tamil Nadu town:

• Sales: 150 kL a month (about 5,000 litres a day): 70 kL petrol, 80 kL diesel.
• Commission: ₹3.70 a litre on petrol, ₹2.60 on diesel; lubricants add about ₹100 per kL.
• Staff: eight attendants across shifts and one manager.
• Investment: about ₹1.5 crore excluding land, including fixed fee, deposit, development share and ₹40 lakh working capital, borrowed working capital costing 10% a year.

That is about ₹24 lakh a year, which would recover ₹1.5 crore in roughly 6 years, before tax and without counting the value of the land you tie up. The chart above shows how hard volume works: at 100 kL a month the same outlet keeps about ₹60,000; at 80 kL it barely breaks even; at 200 kL it makes about ₹3.4 lakh.

Why volume rules: after payment charges, shrinkage and interest, each kilolitre leaves about ₹2,800, while staff, power and upkeep cost about ₹2.2 lakh a month whatever you sell. Divide one by the other and you get the break-even of about 79 kL a month.

Working capital: the hidden load

Dealers pay the OMC in advance for each tanker load. With petrol over ₹100 a litre, one 12,000-litre tanker is worth more than ₹11 lakh at retail. Add stock in the underground tanks and credit extended to fleet customers, and an outlet selling 150 kL a month can easily need ₹40–50 lakh circulating at all times. Credit to transporters is the commonest way dealers get into trouble: fuel sold on credit is cash you have already paid the OMC.

Licences and approvals

The OMC handles much of this for its outlets, but the dealer must know them:

1. District authority NOC (Collector or Magistrate) for storing petroleum.
2. PESO licence under the Petroleum Rules for storage and dispensing.
3. Fire NOC and pollution control consent, with vapour recovery where required.
4. Legal Metrology verification and stamping of dispensing units.
5. NHAI access permission for national highway sites.
6. Trade licence, Shops and Establishments, GST and labour registrations for staff.

Petrol and diesel are outside GST and taxed by excise and state VAT, but lubricants and other sales attract GST.

Rules customers can hold you to

OMC outlets must offer free air, clean drinking water and toilets, keep a first-aid kit, display prices, and let customers check quantity (with a certified 5-litre measure) and quality (filter paper and density tests). Short delivery or adulteration can lead to penalties and termination of the dealership, with loss of the security deposit.

Plus points

• Steady demand: two-wheelers, cars, trucks and tractors fill up every day.
• No price war: the OMC sets the price, so competition is on service and location.
• Brand and supply backed by large public sector companies.
• Long tenure: a dealership can run for decades with good performance.
• Respected local business with additional income from lubricants, stores and services.

Minus points

• Thin margin per litre: the commission is fixed; you cannot raise prices.
• Heavy working capital and large cash handling, with theft and fraud risks.
• Falling sales per outlet: India crossed 1 lakh petrol pumps in late 2025, roughly double the number of a decade earlier, so a new outlet nearby can cut your volume.
• Electric vehicles: as two-wheelers and cars shift to electric, petrol volumes in towns face a long-term threat; CNG and EV charging can soften this only partly.
• Strict compliance: inspections, quality checks and penalties for lapses.
• Staff-intensive: long hours across shifts, with high attendant turnover.

How to avoid fake dealership offers

Fraudsters run look-alike websites and send fake "letters of intent" or dealership certificates, asking for registration, NOC or security fees. Indian Oil has publicly warned about fake dealership certificates. Protect yourself:

• Apply only against locations advertised by the OMCs on their official joint dealer selection portal and in their official newspaper advertisements.
• Never pay to an agent, an individual or a personal bank account.
• Verify any letter at the nearest OMC area office before paying anything.
• Be suspicious of anyone who promises a dealership without a draw of lots or bidding.

Final word

A petrol bunk rewards the right location more than anything else. If the advertised site sits on a road with heavy traffic, the commission adds up to a solid, long-lasting income; if it does not, high fixed costs and working capital make it a slow and risky investment. Estimate realistic monthly volume before you apply, keep credit to fleet customers tight, and deal only through the official selection process.

This guide is general information, not legal, tax or investment advice. Dealer commission, fees, eligibility and fuel prices change, and the worked example uses our own assumptions. Read the oil company's advertisement and brochure for the location you are interested in, and confirm figures with the oil company and a chartered accountant before investing.