Financial Daily from THE HINDU group of publications
Friday, May 24, 2002
Industry & Economy
AP ferro alloys industry makes fresh plea to Govt
VISAKHAPATNAM, May 23
WITH the Andhra Pradesh Government remaining firm on the issue of the hike in power wheeling charges and grid support costs announced by APTransco recently, the ferro alloy industry in the State, which has closed down operations from April 1 in the wake of the hike, has now made a fresh plea to the State Government for the revival of the industry.
The fresh plea by the industry envisages supply of power by APTransco at bulk supply tariff, as is being supplied by the latter to the distribution companies in the State. Supply of power at bulk supply tariff, which is about Rs 1.80 per unit, against the current rate of Rs. 3.70 per unit, will help in the revival of the ferro alloy units, industry sources told Business Line.
According to the sources, the revival of the industry would immediately result in increased revenues to the State exchequer to the tune of Rs 100 crore annually. Further, this would revive the source of livelihood for the 10,500 people directly employed by the industry, they point out.
Andhra Pradesh has six ferro alloy units, five of which have closed down operations from April 1. The only unit that is operating is the Nav Bharat Ferro Alloys, which has a coal-based captive power unit.
The industry has 2.5 lakh tonnes of installed capacity, which could earn foreign exchange of Rs 190 crore per annum for the country and contribute a revenue of Rs 66 crore to the State Government. During the last five years, the industry in the State accounted for almost 25 per cent of the country's production of ferro alloys.
According to industry sources, power is the chief input for ferro alloy units, accounting for 40 per cent of the cost of production. The power requirement varies from 4,000 units per tonne of high carbon ferro chrome production to 9,000 units per tonne of ferro silicon production.
``Even with the availability of NTPC power at Rs. 1.71 per unit, including wheeling charges of 15 per cent in kind, the ferro alloy industry in the State has been incurring losses for the last few years and finding it difficult to compete with international producers like South Africa, China and Norway, where power is supplied at 80 paise to 100 paise per unit. The 408 per cent increase in wheeling charges from 25 paise per unit to 127 paise per unit from April 1 proved to be the last straw for the industry,'' a major ferro alloy producer said.
The sources say that if the State Government does not respond to the industry's fresh plea to supply power at bulk supply tariff, the ferro alloy units would have to be permanently closed or shifted to other States.
Industry observers, however, feel that getting power at bulk supply tariff would not be easy. For one, some legislative changes would have to be introduced to enable APTransco to provide power to consumers directly, circumventing the distribution companies, at bulk supply tariff.
Further, the distribution companies, which buy power from APTransco at bulk supply rates for distribution to consumers, are likely to queer the pitch for the industry, as it would stand to lose a significant slice of revenue if power is directly supplied to the industry by APTransco at that rate.
Also, this might set a precedent, prompting consumers in other sectors to come up with a similar demand. "There are some hurdles, but we are left with no other option,'' a ferro alloy producer admitted.
The industry's cardinal argument is that if it were to receive power at bulk supply tariff, not only the State Government's revenue gets a boost, but also APTransco would benefit in the form of minimum transmission losses, as the industry operated at a very high load factor and power factor.
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