Ferro Alloys Corporation of India is one of the oldest company in the industry and the oldest in Andhra Pradesh. It recently informed the BSE that it has declared a lock-out at its plant — this comes after a 10-day shut down of its operations.

In the last six months, the State has seen ten out of the 31 makers of this vital raw material for the steel industry winding up operations, unable to stem the increasing costs. These include: VBC Ferro Alloys, VBC Industries, RV Alloys and ASV Ferro Alloys.

Another five companies, which started operations in the last three years, are in the process of closing down, even as they knock at the doors of banks for a rescheduling of their loans. The rest are operating at less than 50 per cent of their capacities, estimated at 2.75 lakh tonnes.

This is symptomatic of the woes facing the Indian ferro alloys industry in the wake of demand slowdown, rising input costs and higher power bills.

The units in Andhra Pradesh, which account for 30 per cent of the country’s production, are particularly in an unenviable position; this is due to the sharp increase in power tariff and prolonged cuts in the last three years, apart from the common market conditions.

In the last three years, the tariff for the industry had been hiked from ₹2.65/ unit to ₹3.65 and ₹4.85 for the current fiscal. Now, the State power distribution companies have come out with fresh proposals for 2014-15, which will increase the tariff to about ₹6.40 — a 40 per cent rise. “And if this were to happen, the entire industry in the State will have no option but shut down or declare lock-outs. We are trying to talk to the State Government,” MR Prasad, Secretary General of AP Ferro Alloys Producers Association, told Business Line.

Power constitutes 60-70 per cent of their production cost. A ₹1/ unit hike in price pushes up production cost by about ₹4,000 a tonne for ferro chrome and ferro manganese, and ₹9,000 a tonne for ferro silicon, industry players say.

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