AP ferro alloy units spring back to life
From the last fortnight, the sprawling ferro alloys complex of FACOR at Gadividi in Vizianagaram district sprang into life. This was after nearly three years of idle, grim silence, as the company had to shut it down due to high power costs and sullen market. Workers were back to the factory, oiling up the idle machinery and getting ready to resume production after Deepavali. Smiles are back on the faces of the families of the employees, as also the morale of the workers.
Similar scenes can be seen at the majority of the 35 ferro alloy units in the State, after the Chandrababu Naidu Government gave a significant relief to the industry by slashing the power tariff so as to make the plants viable once again.
The State Government has slashed the tariff by Rs 1.50 per unit to bring it down to Rs 3.37 per unit from Rs 4.87 earlier, a move that has re-fired the idle blast furnaces of the ferro alloys industry. “This is certainly a good rate for us. We cannot expect a better deal on the power tariff front,” says Mr R K Saraf, Chairman of AP Ferro Alloys Association and CMD of FACOR.
Crippling power costs
For the last 30-35 months, about 25 of the 35 ferro alloy units had been shut down, as they were crippled by ballooning power costs and subdued demand from the domestic steel industry. Andhra Pradesh used to account for almost 30 per cent of the country’s total production of ferro alloys, which are used by the steel industry for their refractories.
Indeed, power costs had increased by nearly 100 poer cent in the last four years. From Rs 2.65 per unit for 132 KV four years ago, it swelled to Rs 4.81, while for 33 KV the rate was Rs 5.23 per unit. On top of this, the units had to pay an electricity duty of six paise per unit and an average of Re 1 per unt on the Fuel Surcharge Adjustment (FSA) account. The industry as a whole paid Rs 350 crore on FSA account in the last three years.
In fact, from 2002 to 2012, the power costs for the industry increased by just 54 paisa—it was Rs 2.12 in 2002, which rose to Rs 2.65 in 2012. In the following three years, however, it soared nearly 100 per cent to touch Rs 5.23 per unit.
Power accounts for between 40 and 70 per cent of the production cost of different types of ferro alloys.
After protracted negotiations and a flurry of representations, the Naidu Government, last month, offered to adjust a discount of Rs 1.50 per unit in the power bills of the units. In other words, the units would have to pay the power bills at existing high rates and get the reimbursement of Rs 1.50 per unit later.
“But being a capital-intensive sector, the reimbursement method tended to block our capital and we continued to find it difficult to re-start our units. After our pleas, about ten days back, the Government issued a GO envisaging adjustment of the Rs. 1.50 discount in our monthly billings. We find this a great relief,” Mr Saraf told Vizag Industrial Scan.
However, the rider was that this relief will be in force till March 2017. The industry is now seeking extension of the relief by one more year to enable the units to re-start and restore normal production levels. The industry is seeking this extension more so as costs of raw materials, such as manganese and chrome ores, have increased substantially in the last few months.