How a fuel outlet actually makes money
A petrol pump does not set its own retail price and does not choose its own purchase price. Both are handed down by the oil marketing company, and the difference between them is the dealer commission — a fixed amount per litre, revised occasionally, that the dealer keeps regardless of what the fuel itself is selling for that fortnight.
That single fact shapes everything about the business. Because the margin is per litre and not a percentage, a price rise does not make the outlet richer; it only increases the working capital tied up in every tanker load. Volume is the only lever that moves gross margin, and every fixed cost in the outlet — salaries, rent, electricity — has to come out of commission on litres already sold.
It also means the interesting number is never gross margin. It is what survives after evaporation loss and running costs, and that is what this calculator reports.
The evaporation line is the one people leave out
Fuel bought and never sold is a direct cost, priced at what you paid for it — not at the commission you would have earned on it. A pump moving 1.2 lakh litres a month at a 0.2% loss is quietly writing off 240 litres, and at ninety-odd rupees a litre that is over twenty thousand rupees a month against a gross margin of three lakh.
It is easy to omit because it never appears as a payment. Nobody writes a cheque for evaporation. It shows up only as a stock variance, and a pump that reconciles monthly rather than daily sees it as a single unexplained figure rather than as a cost line.
The calculator treats it properly in the break-even too. Loss scales with volume, so it reduces the contribution each litre makes rather than sitting alongside rent as a fixed cost — which means the break-even volume is higher than a naive calculation suggests.
What this calculator does not model
Working-capital cost on the fuel sitting in your tanks, loan repayments, income tax, and non-fuel income from lubricants, air, water, a shop or a service bay. On many outlets the non-fuel side is the difference between a thin profit and a real one — but it varies too much between sites to guess at.
The three levers that actually move the number
Once you have run your own figures, only three things change the answer, and they are not equally available.
- Volume. The only lever on gross margin, and largely a function of site, price parity and service speed rather than anything administrative.
- Loss. The most controllable of the three and the most often ignored. Daily dip reconciliation is what turns evaporation from an unexplained annual figure into a number with a trend you can act on.
- Fixed costs. Real, but bounded — there is a floor below which the outlet cannot be staffed or lit.
Frequently asked questions
What is a typical dealer commission per litre in India?
It is set by the oil marketing companies and revised periodically, and it differs between petrol and diesel and between company and site type. Rather than publish a figure that will be out of date, this calculator asks for yours — take it from your own purchase and selling price for the same litre, blended across the grades you actually sell.
Why does the break-even volume look higher than I expected?
Because evaporation loss scales with volume. Selling more litres also loses more litres, so each additional litre contributes commission minus its share of loss, not the full commission. Dividing fixed costs by the gross commission gives a break-even the outlet can never actually reach.
Should I include my own salary as a cost?
If you want the number to mean profit rather than drawings, yes. An owner-operator who works the forecourt full time and does not cost that time is comparing their outlet against one that pays a manager to do the same job.
Does this account for GST?
No, and deliberately. Petrol and diesel sit outside GST — they carry central excise and state VAT instead, which are already embedded in the purchase and retail prices the commission sits between. GST does apply to some of your input costs, and where it does it is part of the cost figures you enter.