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PrintThe Rs 1,500-crore ferro alloy industry in Andhra Pradesh, which accounts for 30 per cent of the country's total production, has slashed production by almost 40 per cent, impacting steel makers in this region.
This comes in the wake of a hike in power tariff by the State Government and prolonged power cuts in the last few days.
The AP Electricity Regulatory Commission has effected a nearly 50 per cent hike in tariff, increasing it from Rs 2.65 a unit to Rs. 3.65 for the ferro alloys sector with effect from April 1.
The ferro alloy producers will be meeting in Hyderabad on May 9 to decide on whether to appeal before the appellate authority of the commission. In the meantime, the production cut will continue, industry sources said.
There are 30-odd companies in the State producing 2.5 lakh tonnes of ferro alloys, a bulk of which are located in Visakhapatnam and Vizianagaram districts.
The 50 per cent hike in power tariff has increased production cost by Rs 4,000 a tonne for ferro chrome and ferro manganese and Rs 9,000 for ferro silicon.
Production of ferro alloys, a vital input for the steel industry, is power-intensive, with energy constituting between 40 per cent and 70 per cent of the production cost. Power consumption is about 4,000 kwh per tonne for ferro chrome and silico manganese and 9,000 kwh forferro silicon.
"We could have taken a 20-25 per cent hike, but this increase makes the industry unviable, as we have to compete with suppliers from other States that enjoy cheaper power," Mr R.K. Saraf, CMD of Facor Alloys Ltd, and President of AP Ferro Alloys Producers Association, told Business Line.
This development could discourage the proposed investments of Rs 5,000 crore by this sector in Andhra Pradesh, involving a new capacity of 2.5 lakh tonnes.
Production cost is also high as 95 per cent of their raw materials has to be sourced from outside the State. "For one tonne of ferro chrome, we need 2.5 tonnes of chrome ore. Transportation cost of the raw material alone is Rs 5,000 a tonne,"Mr Saraf pointed out.
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