The recent power tariff hike announced by the government is showing its impact on ferro alloys units in the State as they have slashed their production by almost 40 per cent.
The cut in production has cast a shadow on steel makers as ferro alloys units in Andhra Pradesh account for 30 per cent of the country's total production.
While the steep hike in power tariff from Rs. 2.65 a unit to Rs. 3.65 a unit has forced the industry to cut production, the prolonged power cuts/outages have also hit the power-intensive ferro alloys units hard.
Concentrated in Vizag
There are 30-odd companies in the State with a production capacity of 2.5 lakh tonne of ferro alloys. A majority of them are located in Visakhapatnam and Vizianagaram districts. The latest hike in power tariff, according to sources, would hike the production cost by Rs 4,000 a tonne for ferro-chrome and ferro-manganese and Rs 9,000 for ferro-silicon.
The units are already burdened as they have to source 95 per cent of raw material from outside the State, with transport of the material itself costing Rs. 5,000 a tonne.
The AP Ferro Alloys Producers Association initially decided to announce a shutdown from April 1 if it was not spared from the power tariff hike. It, however, deferred the decision and decided to meet on May 9 to chalk out the further course of action, including approaching the A. P. Electricity Regulatory Commission against the hike.
Ferro alloys constitute a vital input for the steel industry involving power consumption of the order of 4,000 kWh a tonne.
This accounts for 40 to 70 per cent of the production cost. “The industry could take 25 per cent hike, but the current increase makes production unviable,” association president and Facor Alloys Ltd CMD R.K. Saraf said.
Coupled with this is the competition with suppliers from other States where power tariff is cheaper. This development is likely to affect proposals for fresh investment to the tune of Rs 5,000 crore in the State for capacity addition of 2.5 lakh tonnes.
