The Rs 1,500-crore ferro alloys industry in Andhra Pradesh, which accounts for 30 per cent of India's total production, will be shutting down operations from April 1 if the State Government goes ahead with its proposal to hike by nearly 80 per cent the power tariff for the industry, a top representative of the AP Ferro Alloys Producers Association told media persons here today..
Production of ferro alloys, a vital input for the steel industry, involves high power requirement, with energy constituting between 40 to 70 per cent of the total cost of production. Power consumption is about 4,000 kwh (units consumed over a period of one hour) for every tonne of ferro chrome and silico manganese produced, while it is 9,000 kwh for ferro silicon.
There are about 30-odd ferro alloy units in the State, producing about 2.5 lakh tonnes annually, a bulk of which is located in Visakhapatnam and Vizianagaram districts.
Investment picture
Apart from the existing industry, the move to hike power costs may discourage fresh investments of Rs 5,000 crore in the pipeline by this sector in Andhra Pradesh, involving new capacity of 2.5 lakh tonnes. The industry currently consumes 180 MW of power and, with the proposed capacity addition, the power requirement is expected to touch 350 MW.
“As we have to compete globally, we cannot pass on the power cost increase to our consumers. And it is impossible for us to absorb the steep hike, leaving us with no option but to close down the industry,” Mr R.K. Saraf, Chairman and Managing director of Facor Alloys Ltd and President of the AP Ferro Alloys Producers Association, said.
In the latest round of revision of power costs, the AP discoms have proposed to hike power tariff by another Rs 2 a unit from about Rs 2.65 , which will result in increase in ferro alloy production costs from Rs 6,500 to Rs 9,000 a tonne. “Since 2002, the power tariff for the industry has risen from Rs 2.12 to Rs 2.65 a unit. As an industry, we enjoyed the status of a special category,” Mr Saraf said.
Industry players feel that a 10 to 12 per cent hike in power costs could have been absorbed, but anything more than this will render the sector unviable.
The closure of the industry will affect directly and indirectly affect the employment prospects of about 70,000 people, while the Government will lose Rs 400 crore revenue in the form customs and central excise, service tax and CST.