DDA plans to auction petrol pump land

At present,land is allotted on lease only to those who are recommended by public sector oil companies. This land comes at a uniform licence fee,irrespective of the location of the pump. If land is auctioned,its commercial value will differ according to its location. This would mean that the licence fee for the pump — which is a fraction of the commercial value of the land — will vary too. In simpler terms,a petrol pump in Saket will now cost more than one in Narela,and not the same as it is now.

The present system has its bugbears. If the oil company is not happy with the location of the site offered,the allocation of the available land may be held up for long. But through auction,these companies can now bid for only those sites they want,making the process quicker.

The proposal (Newsline has a copy) states: “(At present) there is no comprehensive policy framed or rules laid down for the allotment of petrol pumps and gas godown sites.” Instead,individuals who have been given a Letter of Intent (LOI) by oil companies are allotted sites,as and when they are available,at a pre-determined rate called the licence fee. The licence fee increases by 8 per cent every year. Today,the fee stands at Rs 10 lakh per year for a site measuring 36 metres by 30 metres.

The DDA will now either auction the site or offer it through tenders directly to oil companies. Oil companies can then transfer the sites to LOI holders,or those who look after the daily operations.

The auctions or tenders would mean that DDA earns more money,sources said.

The DDA is also looking at opening the field to private players. The proposal states: “Any company which has been authorised/granted marketing rights by the Ministry of Petroleum and Natural Gas,may participate in the tender for allotment of petrol pump sites…” For example,Reliance may lease government land to run retail outlets at the same rates granted to PSUs,which is cheaper,sources said.

However,the proposal makes it clear that even when auctioned,the lease of the sites will not be made on a perpetual basis. Instead,the licences will be allotted for an initial period of 5 years with an annual enhancement of 8 per cent of the fee.

According to DDA,“The licence fee charged at present is not a true reflection of the commercial value of the land.” With the new proposal,each site will be valued on the basis of its location as opposed to a fixed licence fee for all sites. The DDA will set up a Price Fixation Committee,which will be given the responsibility of arriving at the reserve licence fee,which is 5 per cent of the land’s value. Since land value will differ,licence fees will differ too.

Existing petrol pumps,however,will continue to pay the same licence fee and will be shifted to the new system once the initial 5-year lease expires.

The DDA has also introduced a clause to ensure oil companies don’t seek to change the site on grounds of commercial unviability. If a certain site is found unsuitable,they will have to surrender it after paying penalty and then bid for a fresh site. “There will be no request for change of site once allotted,” the proposal states.

A DDA official indicated that the proposal is likely to be cleared at the authority’s next meeting,to be held only after the general elections.

what more

To offset the hike in fees,companies can make the most of the commercial activities that are allowed on the site. But they will have to pay an additional 25 per cent of the licence fee for these. Departmental stores and bank ATMs can be set up at pump site.