The Rs 1,500-crore ferro alloys industry in Andhra Pradesh fears it may have to drastically cut production, if not close down completely, if the State Government goes ahead with its proposed power tariff increase from April.
Category change
Smarting under a severe energy shortage, the 30 or so units in the State, that account for almost 30 per cent of India’s production of this input material, are already operating at just 50 per cent capacity levels.
So far, three to four units have shut down production, with another 10 bracing themselves for this eventuality in the coming months, industry players say.
“At present, the industry is able to draw only 55 per cent of energy and we are operating hardly 50 per cent of our capacity. There is an imminent danger that this industry will have a premature death in Andhra Pradesh,” R.K. Saraf, Chairman of the AP Ferro Alloys Producers Association, said. The discoms (power distribution companies) have now proposed a 42 per cent increase in tariff for this sector, which would push up power cost from the present Rs 3.65 a unit to Rs 5.37 on energy charges alone.
In addition, they have also proposed a change in the HT (high tension) categorisation for this sector, which would impose additional burden on some of the smaller units.
“The industry has already suffered huge losses. Against a capacity of about 2.5 lakh tonnes, the industry is today producing hardly 1.5 lakh tonnes. Given an average cost of Rs 50,000 a tonne, you can imagine the losses,” M.R. Prasad, Secretary-General of the association, told Business Line .
Consumption varies
Power constitutes 40-70 per cent of the production cost of ferro-alloys, used by the steel industries.
Power consumption varies between 4,000 units and 9,000 units a tonne for different types of ferro-alloys.
A Re 1 per unit hike in the power tariff pushes up the production cost by about Rs 4,000 a tonne for ferro-chrome and ferro manganese and Rs 9,000 a tonne for ferro silicon, industry players say.
Prasad said the industry can absorb a tariff hike of about 10 per cent in the current situation.
amitmitra@thehindu.co.in