BENGALURU: Residency Road is a microcosm of the change that has swept through Bengaluru. The thoroughfare from the colonial era lost two landmarks in Imperial and Galaxy theatres; now a petrol pump that catered to the needs of motorists for more than half a century is moving out.
Nagpal Service Station opened in 1964 and did brisk business till its last day on February 16, when it sold about 6,500 litres of petrol and diesel. Despite an average sales of 900 kilolitres of fuel per month, the outlet has shifted to Ballari Road to make way for a new commercial structure that the property owners plan to build.
“We are shifting after 55 years,” said pump owner Sunil Nagpal. “It feels like the end of an era.”
Nagpal Service Station is, in fact, only the latest in a slew of retail fuel outlets that have moved out of Bengaluru’s central business district (CBD). At least 45 have migrated from the heart of the city to the outskirts in the past five years. At least 60 others are expected to follow suit, according to office bearers of the petroleum dealers’ association.
Bengaluru accounted for a little more than 10% of the 4,200 retail outlets of state-run oil companies in Karnataka, with 225 petrol pumps in the CBD till five years ago.
“It is the latest trend — retail fuel dealers are migrating out of the heart of the city. More migrations will take place in future,” said KM Basave Gowda, president of Akhila Karnataka Petroleum Dealers’ Association.
The migration reflects changing business dynamics. Among the reasons cited by Gowda are increasing land cost, diminishing sales volumes in the city and growing consumption on the outskirts, especially along highways.
“The cost of land has grown manifold in the city over the past two decades but revenues for petroleum dealers have remained flat. This mismatch has made it difficult for dealers to sustain business,” said A Tharanath, member of Consortium of Indian Petroleum Dealers.
A fuel pump requires at least 6,000sqft of land. The monthly rent for a piece of land of this size in the heart of the city has soared from around ₹40,000 10 years ago to ₹10 lakh now. Dealer commission is meagre: ₹3.32/litre for petrol and ₹2.31/litre for diesel. While the commission increased by 60 paise in the past five years, the license fee that dealers pay oil companies increased in 2017 from ₹36 to ₹380 per kilolitre of diesel and ₹45 to ₹460 per kilolitre of petrol.
The big dampener, however, is sinking sale volumes in the core areas. Gowda said a petrol pump sold an average of 300 kilolitres of petrol and diesel a month five years ago. The volume has dropped to less 100 kilolitres in many pumps.
According to the findings of the Apoorva Chandra Committee set up by the Centre, business would be unviable for a dealer if his outlet sells less than 170 kilolitres per month.
As sales plunge in the city, consumption is growing on the outskirts. “This is a common phenomenon in cities across India,” said GV Krishna, independent director of Hindustan Petroleum Corporation Ltd.
Falling consumption within the city has been attributed to various factors including traffic congestion, arterial roads becoming one-ways and flyover construction choking vehicle inflow to retail outlets. “About 60% of the fuel sold is diesel. With heavy vehicles being shut out of core areas, consumption is falling in outlets in the CBD,” Gowda said. Fortunately for retail outlets in border areas, fuel prices in Karnataka have been lower than in neighbouring states because of which vehicle owners prefer to cross over to Karnataka to tank up.
“Fuel outlets in Karnataka have benefited since the price difference ranges from ₹4 to ₹7 per litre. The difference widened after sharp price fluctuations in the latter part of last year,” said BT Manohar, chairman, State Taxes Committee, Federation of Karnataka Chambers of Commerce and Industries.
An increase in number of private petrol pumps in the city has also contributed to falling volumes. Private oil companies including Reliance, Essar, and Shell together have around 50 pumps in the city.
The Centre, meanwhile, is continuing to issue new dealerships. Last year, the petroleum ministry announced that HPCL, Bharat Petroleum Corporation Ltd and Indian Oil Corporation Ltd will together issue 65,000 dealerships across India including 5,000 in Karnataka and 40 in Bengaluru. Foreign companies such as British Petroleum and Gulf Petroleum are also set to open 1,000 outlets each across India.
“The petroleum sector has been a milch cow for successive governments. But the government is pushing beyond saturation point in cities like Bengaluru, which is not good for the business,” said Vivek Mallya, independent director, ONGC.