Are GRMs going to be sustainable or will they moderate? MK Surana answers

economictimes.indiatimes.com:

«First of all, the product prices normally follow with a lag to the crude prices and whenever there is an increase in the crude price, there will be a sudden shot up in the GRMs momentarily because the product prices would not have followed,» says MK Surana, Former CMD, HPCL.First up, your sense of whether the GRMs are going to be sustainable at that level? Where do you see it settling? First of all, the product prices normally follow with a lag to the crude prices and whenever there is an increase in the crude price, there will be a sudden shot up in the GRMs momentarily because the product prices would not have followed. But current GRMs are also a result of the Russian product supplies selling above the cap price right now.

And with the reduction in the throughput at the Russian side, there is some sort of a supply gap management issue where the products will not be oversupplied the way it had been sometime back, so that is leading to an increase in the GRM for the time being. Whether $13 is a sustainable GRM? On a longer term, no, because in this quarter because of monsoon and all, the demand will be reducing actually and therefore I think after some time the diesel cracks which are very strong right now should subside a little bit and the GRM should moderate.

But in the next quarter, it should again increase in my opinion.Do you see windfall gains or windfall taxes coming back again then because the same GRM levels when they were last time, the government did impose a windfall tax.No, windfall tax is guided by the individual product cracks not on the overall GRM. So, overall GRM is a combination of all the products put together and the crude prices.