AP’s ferro alloys units in crisis as power tariff hiked

• 80 ps per unit towards MD with effect from April 1

• Industry earns around Rs 1,200 cr per month

• Centre, State get Rs 216 cr per month as GST

• 38 ferro alloys units provide livelihood to 40k families

Visakhapatnam: The ferro alloys industry in Andhra Pradesh has pressed the panic buttons following steep rise in power tariff in different forms with the latest decision to levy maximum demand (MD) charge.

A power-intensive industry, the ferro alloys units which supply their products for steelmaking, are now forced to spend 80 paise per unit towards MD with effect from April 1, 2023. This is in addition to various charges levied in the past like true-up and fuel supply surcharge which has raised power tariff from Rs 4.95 to Rs 7.40 per unit. The number of ferro alloys producers, which was only six about 10 years ago, increased to 38 over the years due to low tariff offered to them, easy access available to raw material and exports through Visakhapatnam Port.

The performance of the ferro alloy industry is based on the steel industry’s performance and they export over 50 per cent of the production. Consequent upon the exports, ferro alloy industry contributes to the GDP by generating foreign flow of funds. With more than 700 MVA contracted maximum demand, the ferro alloy industry in AP is producing about 1.20 lakh tonnes of ferro alloys per month.

The industry earns around Rs 1,200 crore per month on which GST revenue is paid to the Central and the State Governments. Industry representatives say both the Centre and the State get Rs 216 crore per month. Foreign exchange earnings are about Rs 600 crore per month.

Stating that all the ferro alloys units together provide livelihood to 40,000 families, the managements have submitted representations to the State Government, the Energy Secretary and Discom to consider their request failing which, they said, they will be forced to shut down their operations.

AP Ferro Alloys Producers’ Association (APFAPA) president R K Saraf, vice-chairman P S R Raju, general secretary M S S Sarma and MD of Berry Alloys Vijay Gupta said that the industry due to ‘affordable’ tariff offered by the State Government had attracted an investment of Rs 5,000 crore in the past decade.

“We will be left with no alternative than closing down our operations as the enhanced power tariff is not affordable for us,” Saraf, Chairman and Managing Director of Ferro Alloys Corporation Ltd (FACOR), said.

The representatives from the industry say ferro alloys is power-intensive and price-sensitive industry and has existed in the State for the last six decades. The cost of power components in ferro alloys production varies between 35-70 per cent based on the ferro alloy being produced.

Both Centre and the State Government have understood the industry and supported it by providing NTPC power, creating a separate category without MD charges and electricity duty, for its survival.

The representatives said most of the countries where ferro alloy industries are situated get power at less than Rs 3 per unit to make them viable. Similarly, in India where ferro alloy industries are large in number, States like Chhattisgarh, West Bengal and Jharkhand offer power at a low tariff.

They pointed out that from April, 2022 there has been a steep increase in power cost on various accounts like increase in electricity duty by 94 paise and introduction of MD charges of about 80 paise/unit (Rs 475/kVA/month), which was removed during 2002 on the recommendation of a Group of Ministers.

With this, the tariff has gone up at 132 kV potential from Rs 5.01 paise to Rs 6.75 paise per unit. In addition to this the following charges are also being collected: Levy of true-up charges of eight paise (for APEPDCL)/23 paise (for APSPDCL) from July 1, 2022 to December 31, 2023, levy of FPPCA charges of 52 paise (average) on the power consumed by the industry during the FY 2021-22 to be collected from April 1, 2023 month-wise (ie April, 2021 FPPCA charges to be collected in April, 2023).

We will be left with no alternative than closing down our operations as the enhanced power tariff is not affordable for us

- Saraf, Chairman and Managing Director, Ferro Alloys Corporation Ltd