Petroleum Companies’ Draconian Act: An Open Letter to Hon’ble PM Narendra Modi


“Dealers are depending on this business for their livelihood and their existence is being threatened by OMC’S draconian act of amendment…15 States of India have protested it and filed case in the High Court and Minister is only silence spectator! We, The Petroleum Dealers Association solicit Hon’ble Prime Minister Narendra Modi’s kind intervention in alleviating the evils of the dealers in the Petroleum Trade,” says Sasanka Sekhar Sahu, president of petroleum dealers association Odisha. This report is based on the plight and agony of Sasnaka’s story… AS TOLD TO BIBHUTI PATI

Petroleum Dealers are part of the various initiatives taken by the Government to drive the economy in the right direction. Petroleum Sector was the one which was identified by the Government to assist in the Demonetisation Process during November 2016 and Petroleum Dealers solidly stood beside the Government despite various odds. Demonetisation brought into focus the utility of the Petroleum Sector to the core in fulfillment of the Nation’s primary objective.

Now it is the same Petroleum Sector viz Retail Outlet Dealers who are facing the heat of the new guidelines issued by Oil Marketing Company’s (OMC) and the Petroleum Dealers across the Country are facing plethora of problems.

The recent amendment to the Marketing Discipline Guidelines (MDG) in Oct 2017 is nothing but in short curtails the fundamental rights of the dealers and the functioning of the Retail Outlet. The recent amendment to the MDG is in total contrast to the Statutory Acts passed and enacted by the Parliament viz; Legal Metrology Act and Rules; Minimum Wages Act, Payment of Bonus Act, Employees State Insurance Act, Provident Fund Act and Petroleum Act 1934.

These amendments provide for imposing penalties and punishments contrary to the various Acts mentioned above and are ultra virus and are beyond the scope and competence of OMC’s. The various Statutory Acts do not confer and vest no power in OMC’s to take action, impose penalties, fines and there is no delegation or authorization by any Act.

Consequent to the receipt of a letter from OMC’s dated 19.9.2017 wherein Dealers have been asked to pay OMC’s Notified Wages, we dealers have worked out various components of cost which have not been considered by OMC’s and we tend to lose approximately a sum of Rs.1.48 lakhs p.m for an average turnover of 170’kl volume p.m. The Volume of more than 70% of the dealers is less than the national average of 170 kl p.m as indicated in the Apurva Chandra Committee Report (ACC Report) and their loss would be much higher.

OMC’s in its various replies dated 14.7.2016, 09.08.2016, 23.08.2016 and 18.09.2017 have stated that ACC Report is the basis for revision of dealer margin but the recommendations of ACC Report accepted in 2011 are yet to be implemented fully. Our request to provide the break-up of dealer margin has been denied by CMC’s vide their letter dated 23.8.2017 to its own dealers whom they call as Channel Partners and the viability and survival of the retail outlet and the dealers is at stake.

We enclose herewith a gist of the various issues that have been amended and where the Statutory Acts have been infringed and also a worksheet which explains the loss that would be incurred by a dealer selling 170 kl per month.

Petroleum Products viz: Petrol and Diesel are being marketed in the Country mainly by

Indian Oil Corporation Ltd; Bharat Petroleum Corporation Ltd & Hindustan Petroleum Corporation Ltd –  Government of India Enterprises.

All these three Marketing giants are Fortune 500 Companies, Navarathna Companies and Maharathna Companies. Being Fortune 500 Companies, Navarathna Companies and Maharathna companies, these Oil Marketing Companies (OMC’s) need to strictly observe certain code of conduct and need to be transparent in all spheres of their operation. Petroleum products are being marketed by these OMC’s through a network of dealers numbering around 54000 spread all over the Country. Dealers appointed by these CMC’s are being governed by the Marketing Discipline Guideline (MDG) formulated in common by the Industry. This MDG has been amended in 2005, 2012 and 2017 framing various rules for implementation by the Dealers.

MDG amendment is in contravention to the spirit of the letter No-P-17011/3/2012 Mkt (vol. 4) dated IS11′ Aug 2C14 issued by the Under Secretary, Mop & NG which states that “in future Public Sector Oil Marketing Companies (OMC’s) may finalize the MDG at their level after due consultation with the Stakeholders for both IPG and Retail Outlets”. Contrary to this, Dealers who are the stakeholders have not been consulted while amending MDG.

Omc’s have been amending MDG which has no locus stand as it has “neither beers notified through Gazette Notification nor have been approved by the Parliament”. This is evident from the letter No. P 45011/11/2017 Dpsl dated 17.11.2017 issued by the Under Secretary, Mop &ng in response to an RTI query. MDG 2005 covered both the Dealers and Officials and the ambit of MDG 2012 was restricted only to Dealers leaving the Officials to go scc-t free for their negligence as there exists a separate code of conduct for them. Amendment to MDG in 2017 has brought perils to the trade and the survival of the dealers & the family’s depending on such dealership is threatened. By amending MDG in October 2017, the CMC’s have virtually become the lawmakers and usurped the powers of and infringing on the authority vested with various Officers unaware the Legal Metrology Act, Minimum Wages Act, Provident Fund Act, Payment of Bonus Act & Payment of Gratuity Act.


Legal Metrology:

According to the Dealership Agreement CMC is the owner of the premises and equipments installed for storage and sale of petroleum products in the Outlet. Dispensing units installed in the Outlet are calibrated by the Weights and Measures Department. Legal Metrology Rules and Act provide for +/- 25ml tolerance for every 5 liter dispensed. Pursuant to the amendment of MDG, an SOP [Standard Operating Procedure] has been Issued stating only +/- 10 ml is allowed for every 5 liter dispensed which is an infringement of the Legal Metrology Act. BPCL Tender Specification stipulates that a dispensing unit with a tolerance of +/- 15 ml is allowed. The Accuracy Class of the dispensing unit supplied by the Vendor provides for an accuracy of-;-/- 25ml which means OMC is purchasing a sub-standard equipment. OMC who is the owner of the equipment has to maintain the equipment.

Dealers are being asked to get the re-stamping done at their cost If the Dispensing Unix delivers erratically due to normal wear and tear, i S. Answering a Parliament Question No. 3592 on 12.12.2002, the Hon’ble Minister for Petroleum and Chemicals has stated that “Even Imported Machines do not have cent per cent accuracy J_ of Delivery”.

Even Clause 4.2 of MDG 2012 clearly provides that “Equipments are owned by the Company and are being maintained by the Company.” Legal Metrology Act is supreme as far as checking, verification of delivery and imposing penalty in case of any deviation noticed. Various RTI replies from the Officers of Legal Metrology Department and Legai Metrology Rules corroborate this view. Even though Weight & Measures Seals are intact, if there is any variation in dispensing beyond tolerance, Penalty Incorporated in the MDG amendment is as under:

First Instance: Rs.25000/- per nozzle found delivering short beyond permissible limit as specified in Legal Metrology Act/Rules. Second instance within one year of 1st instance: Rs.50000/- per nozzle found delivering short beyond permissible limit as specified by Legal Metrology Act/Rules and suspension of Sales and Supplies for 15 days. Third instance within one year of 1st instance: Termination of the Dealership.


Automation is one of the criteria on which the DAILY PRICE CHANGE MECHANISM was introduced in the Country. According to the internal note of the OMC only SS7S Outlets were automated as on 17.5.2016 and another 10000 Outlets were supposed to be automated by the end of the 5lh phase of automation as against approx 53000 outlets which are operational.

Considerable amount of money is spent on automation and maintenance the functioning of which Is far from expectation. Though Automation is in existence, dealers are changing the price daily manually. ATG (Automatic Tank Gauge which is part of the automation) stock and the physical stock differs and there is always a mismatch.

ATG till today is not calibrated.

OMC have violated the directive of the Director, Legal Metrology on 28.11.2016 to have the underground storage tank calibrated. Traditional dip rods and dip charts are being used to determine stock which is just an arithmetical calculation. Controller of Legal Metrology vide letter dated 24.10.2015 states about the un-authenticity of dip rod/dip chart for determining variation in stock.

Due to fluctuation in power supply and defect in the Stabilizer which are beyond the control of the Dealer if the Automation stops functioning, permission has to be obtained from the OMC Officers to switch to manual mode failing which penalty is imposed or the dealer. Due to poor internet connectivity/erratic power supply dealers find it difficult to communicate with the Officers and if Automation fails Dealers are penalized heavily as under:

Penalty of Rs.l,00,000(Rupees One Lakh) for the first irregularity. Second Offence would lead to suspension of sales and supplies for 7 days and penalty of  Rs.2,00.000/=. Third Offence would lead to termination of dealership.

Provision of Toilet Facility to Public:

The operation of Retail Outlets dealing in Petroleum Products are governed by PESO (Petroleum Explosives and Safety Organisation) Rules and Regulations. Toilets at Retail Outlets are designed for the exclusive use of Staff and Customers. OMC’s vide their letter dated 8.6.2016 informs that as a matter of courtesy dealers are advised to permit the use of Toilets to others. Under Secretary, Mop&ng vide letter dated 17.11.2017 states that “no order declaring toilets at retail outlets as public toilets has been issued”.

But armed with a letter dated 1.9.2017 of Dlrector(D&MC) of MOP&NG addressed to the Director(Marketing) of OMC’s which states that quick action or penalty be imposed on Retail Outlets where toilet is dirty/locked to ensure clean toilet facilities, Officials have been inspecting Toilets and imposing penalties on dealers across the Country.

Bombay High Court has ruled that Toilets in Retail Outlets are not Public Toilets. PESO vide its letter dated 7th June 2018 states that Toilets are for customers only and in view of Safety Hazard ail other activities are completely restricted in the premises.

Penalty for non providing clean toilet facility to public is as under:

First instance Rs.15000, Second instance Rs. 25000, Third and Subsequent instances: Rs.35000/- or 45% of the monthly dealer margin (based on the average of last 6 months) whichever is higher; and Suspension of Sales 3nd Supplies for 7 days or rectification of the defect in toilet, whichever is later!

Payment of Wages:

As per Section 2(b) (ii) of the Minimum Wages Act ‘Appropriate Government’ is the State Govt in relation to any Scheduled employment other than the one specified in Section 2(b)(i) of Minimum Wages Act. Accordingly States have fixed Minimum Wage to be paid in the Petroleum Trade. OMC letter dated 19.9.2017 fixes the wage of Construction Workers to be paid to Staff engaged in the Petroleum Trade. How the Workers in the Construction Industry could be related to the Staff of Petroleum Trade has not been indicated. The Area wise Rates of Minimum Wages for Scheduled Employments in the Central Sphere has been fixed by the Central Govt for 3 different Areas separately viz; Area A, Area B and Area C. OMC’s in their letter at Ne.3 have directed Dealers to pay uniform OMC notified wages throughout the Country without factoring the Geographical pattern prevailing in the Country. Payment of Wages Act/Minimum Wages Act no where specify anything about ‘OMC notified wages’. Dealers are being directed to pay ‘OMC Notified Wages’ and not the one envisaged under the Act by the respective State Govts.

Payment of Bonus Act:

Payment of Bonus Act mandates payment of Bonus by such establishments engaging more than 20 employees and dealers enjoy infancy protection of 5 years from the date of the l1′ sale invoice. As such dealers engaging iess than 20 employees are exempted from the provisions of this Act. OMC’s have made It mandatory to pay bonus irrespective of the number of employees engaged and from the first year of operation itself.

Payment of Gratuity Act:

Payment of Gratuity Act is applicable to those establishments in which 10 or more persons are employed, or were employed,, on any day of the preceding 12 months. As per Section 4 of the Act Gratuity shall be payable on the termination of the service of the employee after he has rendered continuous service of not less than S years which may be on the Superannuation, Retirement or Resignation and on the death or disablement due to accident or disease of the employee. OMC’s have made it mandatory to pay Gratuity from the very first day of employment and even if less than 10 are employed.

Payment of Provident Fund:

Provident Fund Act is applicable to an establishment if it employs more than 20 persons.

OMC’s have made it mandatory to pay Provident fund irrespective of the number employed by them.


This Act is applicable to such establishments who are engaging more than 10 employees. The dealer shall comply with ESI act as and when applicable. OMC’s have made it mandatory to cover employees under ESI if less than 10 employees are engaged and even in areas where ESI is not applicable. Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan jyoti Bhima Yojana (PMJJBY). These are schemes to be availed voluntarily by the employee but the Dealer is asked to contribute to the Scheme. Non-adherence by the Dealer to the above such as Payment of OMC notified wages, Payment of Bonus, Payment of Gratuity, Payment of Provident

Fund, coverage under ESI and PMSBY and PMJJBY would be imposed penalty as under: first instance: 20% of the monthly dealer margin (based on average of last 3 months) Second instance: 30% of the monthly dealer margin (based on average of last 3 months); Third and Subsequent instances: 40% of the monthly dealer margin (based on average of last 3 months) & Suspension of Sates and Supplies for IS days. It is clearly evident from the above the natures of hardship the Petroleum Dealers across the Country are facing today.



  1. Ramotar Prasad more

    Well described the dealers problem.

  2. A good analysis of the problems being faced by the dealers across the Country.

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