AP Ferro Alloy units in dire straits

ferro alloy corporation

    A quicksand of woes is dragging down the Rs 1500 crore ferro-alloys industry in Andhra Pradesh One-third of the 37 ferro alloy units in the State have already downed shutters and a majority of the rest may follow suit in the next two months, if things do not improve.
    High power costs, a slump in ferro alloy prices, delays in grant of mining licences and a tame demand from the steel industry have led to a severe financial hemorrhage in this sector.
    The steel industry, the major consumer of ferro alloys, a vital raw material in steel making, itself is on shaky grounds and hence has much lesser requirement of the material. Each tonne of steel contains about six kgs of manganese alloys.
    “About 10-12 units in AP have stopped production.  If things do not improve in the next one to two months, there will hardly be one or two units in operation,” said Mr Arnav Saraf of FACOR speaking to Vizag Industrial Scan.
Falling prices
    Globally, prices of ferro alloys have been plummeting in the last few months.  In tune with this, indigenous prices have also been falling.
    Despite India having a total production capacity of 5.15 MTPA (million tonnes per annum) in the ferro-alloy industry, the industry has been witnessing a slowdown in the past 5 years (2013-18), with production of ferro-chrome stagnant at 1 million tonnes, ferro-manganese at 0.52 million tonnes and ferro-silicon at 0.09 million tonnes.
    “The domestic ferro-alloys industry needs to be promoted through a mix of progressive market development strategies and suitable fiscal measures to offset cheaper imports” opines Mr Sunil Duggal president of FIMI.
    “There has been a 30-40 per cent fall in ferro alloy prices in the last few months.  For example, prices of ferro chrome have slid from Rs 72,000 per tonne to Rs 60,000 per tonne in the last three months alone.  Today, the prices we get for our ferro alloys hardly matches our cost of production,” Mr Saraf said.
Power woes
   The biggest challenge before the industry is the high cost of power, which account for between 40-70 per cent of the cost of production.  Power consumption varies between 4,000 units and 9,000 units a tonne for different types of ferro-alloys.
    Currently, the industry is paying a power tariff of about Rs 5 per unit and there are talks that this will be further increase this year Typically, a Re1 per unit hike in power tariff nudges up the production cost by about Rs 4,000 a tonne for ferro-chrome and ferro-manganese and Rs 9,000 a tonne for ferro silicon.
    “We have been requesting that the tariff be brought down to at least Rs.3.50 to Rs 4 per unit, which could sustain our current operations,” said an industry insider.
Clearance delays
    Then there are inordinate delays in getting the various types of mining clearances. Industry sources said it took at least two to three years to get the clearances for mining of the ores, which translated into corresponding loss of revenue.
For example, a major ferro alloy producer here, which has a chrome ore mine in Odisha, has been waiting for four years just to get a renewal in mining license. There have been reports that the Tatas may auction out some of its ore mines.

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