Gross refining margins (GRMs) will remain steady at $6-8/ barrel (bbl) for public sector refiners and upwards of $10/bbl for the private refiners, assuming a base case for crude prices at $35/barrel (bbl) in FY17, according to India Ratings and Research (Ind-Ra).
Healthy GRMs of Indian refiners are a result of expansion in the product spread and lower fuel costs aided by soft international crude prices.
Ind-Ra notes that refinery transfer prices (RTP) for petrol and diesel, which constitute bulk of the refinery yields, declined by around half as much as the fall in the Indian crude basket. RTPs are determined on the basis of trade parity, factoring in import and export prices in the ratio of 80:20. RTP for Bharat Stage IV petrol declined by 21% over January 2015-January 2016.
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