Ferro Alloy industry in Andhra Pradesh in dire straits

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 6 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 5 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% of their capacities, estimated at 2.75 lakh tonne. 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% 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 3 years, apart from the common market conditions.

In the last 3 years, the tariff for the industry had been hiked from INR 2.65 per unit to INR 3.65 and INR 4.85 for the current fiscal. Now, the State power distribution companies have come out with fresh proposals for 2014 to 2015, which will increase the tariff to about INR 6.40 a 40% rise.

Mr MR Prasad, Secretary General of AP Ferro Alloys Producers Association, said that “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.”