Change the narration: the officer said to the peon, “If you do not do your duty well, I will dismiss you”.

The officer threatened to dismiss the peon if he did not do his duty well

The officer told the peon that if he did not do his duty well he would dismiss him

The officer suggested to the peon that if he did not do his duty well, he would be dismissed

None of these

The officer's statement is a warning, so "threatened" fits the context.

It conveys the conditional clause accurately in indirect speech.