High power tariff is pushing ferro-alloys units in north-coastal Andhra Pradesh and other parts of the State into a crisis. Many of the units are operating below their capacities and some of them have altogether stopped production.

There are 38 small and big units in the State producing silicon manganese, ferrochrome and ferrosilicon with a total production capacity of eight lakh tonnes a year. Of them, only eight are fully operational and 12 are operating at 50 per cent capacity.

Power is the main raw material for ferro-alloys units. The tariff, which used to be ₹2.65 a unit in March 2012, has been hiked to ₹4.87 in subsequent upward revisions.

Production cost

Ferro-alloys units, who supply their products to steel manufacturers both in India and foreign countries, spend 35 to 70 per cent of their production cost on power. An investment of ₹2,000 crore was made in the sector in response to the promises made by the undivided AP since 2010.

Ravi Singhal, Director of Berrys Alloys, said, “Apart from the high power tariff, we are also burdened with fuel surcharge adjustment and deemed consumption charges making our operations unviable.”

He set up his unit at Bobbili in Vizianagaram district with an investment of ₹50 crore four years ago. It has a capacity of 35,000 tonne a year, but is now operating at half the capacity because of high power tariff. He said the industry used to demand uninterrupted power supply before bifurcation. “Now power supply is not a problem but low returns are making the unit sick,” he said.

In the lurch

The problem is more complex for small entrepreneurs as they run their units with a single furnace, making scaling down impossible.

“I am not able to decide whether to run my unit set up in 2012 at Bobbili with an investment of ₹18 crore or shut it down,” said Vidhan Mittal, the Managing Director of MDA Mineral Dhatu.

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