Presentation to Dealers

on Dealers’ Margin
The golden principles adopted for revision

• Low volume dealers will get maximum increase in commission in

terms of percentage & paisa per litre.

• “B” site dealers will get more commission than “A” site dealers for
same volume.

• Gross increase in dealer’s commission in absolute terms shall

increasingly go up as sales volume goes up.
 The salient points of revision

• The Dealers’ margin has been increased for all category of dealers i.e. low
selling and high selling dealers, and A Site (CC ROs) and B site (DC ROs).

• Considering the hardship of ROs selling less than 170 Kl/p.m., special care
has been taken to alleviate the same.

• Central Minimum Wages has been considered for the revision in Dealers’
Margin. Consequently, all manpower employed at a retail outlet are
required to be paid at least minimum wages as applicable under Central
Minimum Wages (applicable for Construction workers) or statutory
minimum wages as notified by State, whichever is higher, effective
1.8.2017.

Needless to mention that the other statutory requirements like PF, Bonus
etc are to be complied with which has been built up in Dealers’ margin.
 The salient points of revision

• Enhanced amount of Business Return (in lieu of earlier element of Dealer’s

remuneration) is included in the Dealers’ margin.

• Revision in Return on Net Fixed Assets (NFA - i.e. Return on investments

made in the RO), as recommended by IIM Bangalore has been
implemented. This has resulted in further increase in Dealers’ margin.

• The recommendation of IIP Dehradun on revision in HSD Loss norms has

been implemented.

• The operating cost elements are revised based on All India Consumer Price
Index (AICPI). Electricity cost has been revised on the basis of weighted
average of State Electricity charges as hitherto.

• The Bank charges has been revised as per current SBI circular.
 Fixed Components of Dealers’ margin

1. Return on Net Fixed Assets / License Fee Recovery (LFR)

As per recommendation of IIM Bangalore Return on NFA has been revised
as under :-
Return on NFA
• MS : Rs. 393.74 per Kl
• HSD : Rs. 332.18 per Kl
LFR/SSLF recovery
• A Site / CODO RO : MS: 369.35 per KL; HSD: 307.79
• B Site / DODO RO : MS: 130.03 per KL; HSD: 108.36
 Revised NFA & LFR

NET NFA ELEMENT INCREASE ( ALL FIGS IN RS/KL)

AS PER CURRENT DEALERS' MARGIN AS PER PREVIOUS DEALERS' MARGIN ( ALL FIGS IN RS/KL)
MS HSD MS HSD
NFA + GST PAYMENT 497.16 418.36 NFA + GST PAYMENT
58.04 49.08

CC RO DC RO CC RO DC RO
MS HSD MS HSD MS HSD MS HSD
LFR + GST RECOVERY 472.77 393.97 233.45 194.54 LFR + GST RECOVERY
55.04 46.08 25.04 21.08

NET NFA ELEMENT 24.39 24.39 263.71 223.82 NET NFA ELEMENT3.00 3.00 33.00 28.00

NET NFA ELEMENT

INCREASE IN DEALERS'
MARGIN (AFTER 21.39 21.39 230.71 195.82
SETTING OF LFR/GST)
Slab based components : Business Return

Slab wise minimum Business Return are as follows :-

Combined MS/HSD Volume / Month Business Return
(Per month)

12-25 KL : Rs. 12000

26-50 KL : Rs. 20000
51 – 100 KL : Rs. 24000
101-150 KL : Rs. 26000
151-170 KL : Rs. 27500
(The above amounts are fixed for the particular volume slab)
171 Kl & above (per Kl) : MS : Rs. 201.76
HSD : Rs.149.46

This amount will grow in a linear manner with increase in volume.

Slab based components : Manpower Cost

Combined MS/HSD Sales (KlS) % increase over

current cost of
wages 1. e-Payment of Salary
≤ 400 49%
401 – 600 46% 2. PF, Bonus, ESIC & other
601 – 800 43% Statutory Compliance
801 – 1000 40%
1001 - 1200 37%
3. All Employees to be covered
under :
1201 - 1400 34%
a. PMSBY
1401 - 1600 31%
b. PMJSY
1601 - 1800 28%
1801 - 2000 26%
2001 - 2200 24%
2201 - 2400 23%
2401 - 2600 22%
2601 - 2800 21%
≥ 2801 20%
Slab based Manpower

Monthly Volume Manpower as per Manpower as per

(Kls) earlier margin revised margin
25 2 2
50 5 5
100 9 10
400 38 38
600 56 56
800 75 73
1000 94 90
1200 113 105
1400 132 120
1600 151 134
1800 169 147
2000 188 161
2200 207 175
2400 226 189
2600 245 203
2800 264 217
3000 282 231
3200 301 246
 Variable components of Dealers’ margin

Cost of Product Loss

As per the study conducted by IIP Dehradun, the loss % on HSD has been revised
from 0.18% to 0.17%.

Cost of Working Capital

Earlier this was known as Return on Working Capital. No change is proposed in this
component and its updation, which is 5 days stock in MS & 4 days stock in HSD &
Interest is calculated @ SBI MCLR rate.

The above two elements are worked out as % of Billable product price (Invoice
value) as under:
Elements MS HSD
Cost of Working Capital - % of invoice value 0.1089 0.0871
Product Loss - % of Invoice value 0.7500 0.1700
Total 0.8589 0.2571
Summary : Revised Dealers’ margin

Fixed components

Elements Rs. per Kl

MS HSD
Return on NFA 393.74 332.18
Operating Cost except Manpower Cost & Business 396.82 293.94
Return
Manpower Cost & Business Return @ lowest rate 1780.76 1319.08

GST @ 28% on LFR 103.42 86.18

Total Fixed component
2674.74 2031.38
Summary : Revised Dealers’ margin

Variable components
Elements
MS HSD
Cost of Working Capital - % of invoice value
0.1089 0.0871
Product Loss - % of Invoice value
0.7500 0.1700
Total
0.8589 0.2572
Slab Based Incentive

Elements
For maintaining std. manpower based on slabs : Rs. Per Kl slabwise
Min.Business return for ROs selling up to 170 KL per Month : Rs. Per Kl
slabwise
Summary : Revised Dealers’ margin

Minimum Increase in Dealers' margin for all dealers

Paise / Litre
MS HSD
A SITE (CC ROS) DEALERS 23.08 17.11

B SITE (DC ROS) DEALERS 44.02 34.55

In addition to this, dealers selling upto 12-2800 Kls will get differential margin
on a/c of slabwise business return and manpower, before end of next month,
in the range of :
Paise / Litre
MS HSD
A SITE (CC ROS) DEALERS 1.32 to 65.79 0.98 to 61.18

B SITE (DC ROS) DEALERS 1.32 to 65.79 0.98 to 61.18

THANK YOU.

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