The Andhra Pradesh ferro alloys makers may decide to impose further production cuts when they meet on April 5 to review the impact of the steep hike in power tariff from April 1.
While production cuts seem to be the only option left for most of the units, small units may have to shut down production as operations become unviable at current power tariffs. So far, three to four units have shut down production, with another about 10 bracing themselves for this eventuality in the coming months, industry players say.
The AP Ferro Alloys Producers Association will also consider other ways to meet the hike, such as drawing on alternative power sources. It, however, cannot pass on the hike to its customers, as globally prices of ferro alloys are on a downward slide.
The 30-odd ferro alloy producers in the State, which have a combined turnover of Rs 1,500 crore, account for about 30 per cent of the country’s production. Ferro alloys are a key input for the steel industry.
Latest revision
The latest revision in power tariff saw an increase of 24 per cent in power rates for this sector, which is an energy-intensive one. Power constitutes between 40 and 70 per cent of the production cost.
“From Rs 3.65 a unit, the rates are now increased to Rs 4.58 a unit for 132 kV and Rs 5.41 for 11 kV consumers,” M. R. Prasad, Secretary-General of the association, told Business Line .
The hike in energy costs will push up production cost by an average of Rs 4,000 a tonne, he pointed out.
The increase is more for certain varieties of ferro alloys. While the increase in production cost could be little less than Rs 4,000 a tonne for ferro chrome, it could be as high as Rs 9,000 a tonne for ferro silicon, industry players say.
As it is, most units are running at 50 per cent capacities. Against a capacity of about 2.5 lakh tonnes, the industry is today producing less than 1.5 lakh tonnes.