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Ferro Alloy Industry Requires Level Playing Field in the Liberalised Economy
(April 2001)


By T. S. Sundaresan

Secretary General, Indian Ferro Alloy Producers Association

The Indian Ferro Alloy Industry is not as old as the Steel Industry. From a humble start in the fifties the capacity has grown enormously with enough potential to increase exports in future. However, the high power tariff in India is the stumbling-block. Though the industry started getting power from National Thermal Power Corporation at NTPC tariff, it is still higher than the power tariff available in countries like Norway China, Russia, Kazakhstan etc. which are a major producers and exporters of ferro alloy too.
What is more, the import duty on ferro alloy has also been reduced drastically to 25 per cent in the post - liberalised era. Further, steel exporters are eligible to import their raw material including ferro alloys free of duty against advance licence.
With plenty of raw materials like ores and reductants available in the country, what the industry needs is a level playing field by power being made available at international comparable tariff.

The Indian Ferro Alloy Industry is more than four decades old, and produces Bulk and Noble Ferro Alloys. Though this Industry is not as old as the steel industry, its capacity has increased substantially from a humble start in the fifties, meeting the requirement of the steel industry in the country. The growth of the steel industry has not picked up as expected, whereas the growth of the Ferro Alloy Industry has stepped up, much more than the expected level. With the result, the capacity available in the country, is much more in the Ferro Alloy Industry. It has a lot of potential to increase its exports in the near future.

India has been bestowed with adequate resources of all basic raw materials required for the production of Manganese, Silicon and Chrome Alloys. Most of the Ferro Alloy Units have come up in the six States of Andhra Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Orissa and West Bengal, mainly due to availability and/or proximity of the raw materials.

Ferro Alloys is a power intensive industry. The total connected load of the industry has grown almost 8 to 9 times from 130 MVA in the mid sixties to over 1000 MVA as on date. With the result, the installed capacity of the industry is 1.5 million tonnes of Bulk and Noble Ferro alloys. Capacity of Manganese Alloys is around 700,000 tonnes, Ferro Silicon 175,000 tonnes and Ferro Chrome/Charge Chrome about 600,000 tonnes and Noble Ferro Alloys viz., Ferro Molybdenum, Ferro Vanadium, Ferro Tungsten, Silico Magnesium, Ferro Titanium, Ferro Phosphorous, etc., around 20,000 tonnes.

Production Of Ferro Alloys

Production of different Ferro Alloys for last four years is given in table I.

Table I Statement showing  production of Ferro Alloys during 1996-97 to 1999-2000 as available with the association

(Qty.  in Tonnes)






Bulk Ferro Alloys        
HC Ferro Manganese 127,455 162,715 159,164 184,966
MC Ferro Manganese 7,461 488 903 1,940
LC Ferro Manganese 1,500 1,509 1,259 1,041
Sillco Manganese 232,611 192,793 198,282 174,964
LC Sillco Manganese 0 0 2,185 0
Ferro Sillcon 56,286 57,262 79,742 78,326
HC Ferro Chrome/Charge Chrome 298,807 305,327 338,897 238,653
LC Ferro Chrome 0 1,947 5,467 76,730
Sillco Chrome  0 0 311 6,427
Ferro Sillco Magnesium 2,310 1,717 1,429 1,458
TOTAL 726,430 723,758 787,639 694,505
Ferro Aluminum 0 0 3,058  
Ferro Molybdenum 1,693 662 501  
Ferro Zirconium 15 0 15  
Ferro Boron 0 0 15  
Ferro Vanadium 735 345 175  
Ferro Tungsten 25 0 3  
Ferro Titanium 0 8 0  
Ferro Phosphorous 0 20 0  
TOTAL 2,466 1,035 3,768 _______
GRAND TOTAL 728,898 724,793 791,407 694,505
PN :1) Production of Non-Members given above is estimated
2) Production of Noble Ferro Alloy producers for the year 1996-97 is Not Available

It would be observed from the table that the capacity utilisation is ranging from 50 to 55 % and the balance capacity of 45 to 50 % is lying idle. The production growth rate is negligible mainly due to stagnation in the Steel production and demand in the country. The demand for steel has not increased to the level anticipated. It would be further noted from the production statement that the production of Manganese Alloys is 53 % of the Manganese Alloy capacity, Ferro Silicon is 32 % of the Ferro Silicon capacity, Chrome Alloys is 50 % of the Chrome Alloy capacity, and Noble Alloys is 48 % of the total Noble Alloy capacity during 1999-2000. This also includes the export production. Export is around 28 % of the total production during 1999-2000.

Potential For Exports

The capacity increase of the Ferro Alloy industry in general, followed the course to meet the planned target of steel industry in the country, and also to remain potential exporters of Ferro Alloys in the international market, to earn substantial foreign exchange for the country. However, the performance of the industry started deteriorating from the mid - sixties, due to various reasons, the foremost being, steep increase in the power tariff, fuel, oil, raw materials and transport charges.

Exports started sliding from 1978 onwards.The eighties, witnessed the maximum erosion in the export performance of the Ferro Alloy industry.

However, after initiation of the liberalisation
programme, there has been a spurt in the export of Bulk Ferro Alloys. Like all other Sectors, exports from this sector have also increased from 1991-92 onwards. Exports of various Ferro Alloys for last 4 years and the percentage of exports over production are given in Table II.

Table - II Statement showing Export of Ferro Alloys and percentage of Export over production during 1996-97 to 1999-2000 as available with the association

(Qty. in Tonnes)






Bulk Ferro Alloys


HC Ferro Manganese





LC Ferro Manganese





Sillco Manganese





Ferro Sillcon





HC Ferro Chrome/Charge Chrome





LC Ferro Chrome





Ferro Sillco Magnesium










Value (Approx)

Rs in Million






Ferro Vanadium




Ferro Molybdenum




Ferro Phosphorous








Value (Approx)

Rs in Million









Value (Approx)

Rs in Million





Percentage of exports

over Production





PN : Exports of noble Ferro Alloys for the year 1996-97 is Not Available

Exports that were around 15 % of the production when the liberalisation policy was introduced in 1991-92, have now reached around 35 % of the total production. While the capacity has simultaneously increased in quantum in terms of value, exports were around Rs 2500 million and have crossed Rs 5000 million in 1997-98. However, there was a slowdown in the exports during 1999-2000, which have dropped to Rs 3925 million, due to high power tariff in the country as compared to the power tariff in other competing countries. The power tariff in India is around 8 to 9 US cents per Kwh, as against the power tariff in Norway, Canada, Iceland, Venezuela, Brazil, South Africa, France, Sweden, US, etc., where it ranges from 1 to 3 US Cents per Kwh. The power tariff in other countries is given hereunder:

Power Tariff in Other Countries (Approx.)


NORWAY                                 81

CANADA                                 60

ICELAND                                 60

VENEZUELA                           83

BRAZIL                                   120

SOUTH AFRICA                    104

FRANCE                                 113

SWEDEN                               131

   USA                                        108

The Annexure (A) - Average power generation cost per unit in some States as published in Business Standard dated 27-7-1999, and Annexure (B) - List of High Tension Industrial Tariff in all States, as published by Power Line - April 1999, reveal that the generation cost is almost half of High Tension Industrial Tariff. This would be lessened if the efficiency and the Plant Load Factor are taken into consideration. This shows that the generation cost is not high in our country, but it is sold at higher tariff, particularly to power intensive industries like Ferro Alloys at an exorbitant tariff adding the additional cost of cross subsidisation to Agriculture Sector, Low Plant Load Factor, theft of power and Transmission and Distribution losses

With the introduction of liberalised economy, Government’s policy is to make raw materials available at international prices to the Indian producers for exporting their products. However, such provision was not made available to Ferro Alloy industry immediately after liberalistion.

With constant follow-up and persuasion from Ferro Alloy Producers’ Association and the Members of the Association, the industry started getting power from National Thermal Power Corporation (NTPC) at NTPC tariff plus wheeling charges from the SEBs to Ferro Alloy Units in the States of Andhra Pradesh, Maharashtra, Orissa, Karnataka and Kerala. But, the Industry still feels, that the power tariff from NTPC is also higher, than the power tariff available in other countries like Norway, China, Russia, Kazakhstan, South Africa, Brazil, Finland, etc., which are the major producers and exporters of Ferro Alloys.


STATE                                       PAISE PER UNIT

Uttar Pradesh                              196

Madhya Pradesh                         178

Karnataka                                   179

Maharashtra                                198

Rajasthan                                   222

Gujarat                                       194

Andhra Pradesh                           176

Tamil Nadu                                  189

All India                                      186

The Import Duty on Ferro Alloys has been reduced drastically during the post-liberalised period and the same is at 25 % at present. Further, steel exporters are eligible to import their raw materials/inputs including Ferro Alloys, free of duty against Advance License. More flexibility is given to them to import Ferro Alloys much more than the requirement for production of one tonne of steel for export. This has resulted in the import of Bulk and Noble Ferro Alloys, which were very negligible in the past, have increased tremendously, in the last couple of years at very low prices.

High Tension Industrial Tariffs


Energy Charges (Rs Per Kwh) Demand charges (Rs Per Kva/pm)
Andhra Pradesh 2.25-3.05


Assam 2.00-2.70 75-85
Bihar 1.69-1.78 100-125
Delhi 3.00-4.50 150-200
Gujarat 1.59 83-180
Haryana 3.92 -
Himachal Pradesh 2.15 190
Jammu & Kashmir NA NA
Karnataka 3.10-4.30 150
Kerala 1.28-1.34 130-146
Madhya Pradesh 2.20-3.22 107-146
Maharashtra 3.35-3.70 90-180
Meghlaya 1.35-1.38 85
Orissa 2.30-2.50 200
Punjab 2.43-2.75 80-300
Rajashtan 2.25 NA
Tamil Nadu 2.45-3.45 110-170
Uttar Pradesh 2.30-3.08 105-165
West Bengal 2.40-2.60 180

The imports at present have crossed over Rs 2500 million including import of Ferro Nickel, which is not manufactured in the country. If this situation continues, the future of the Industry will be very bleak. But the scope for exports is large in this Industry, which can increase the foreign exchange earnings to Rs 1000 crores.

The industry has already established itself as a regular exporter of High Carbon Ferro Chrome/Charge Chrome and Silico Manganese. It has potential to export Manganese Alloys, Ferro Silicon, Ferro Vanadium, Silico Magnesium, etc.

The units have incorporated the latest technology in order to use non-metallurgical grade ores both lumps as well as fines, after necessary beneficiation and agglomeration. The units have also incorporated effective pollution control measures, in the form of gas cleaning, deoxidising and waste heat recovery. Government has implemented Pollution Control measures as statutory for new plants, thus making new Units to fulfill the statutory requirement. The reputed exporters have obtained 9002 certification.

The raw materials like ores and reductants are available in the country. The industry only needs a level playing field, by supplying power at international comparable tariff. As power cannot be imported, the industry needs the supply of power from NTPC from its oldest plant at NTPC tariff, in different States to the Ferro Alloy Units in respective states, from Government’s unallocated quota of 15 %, on a regular basis. Further, the wheeling charges differ from State to State. Central Government needs to evolve a policy of charging a uniform NTPC tariff and wheeling charges not exceeding 5 % of the tariff, in all States where NTPC power is being supplied to Ferro Alloy Units.

It is long overdue, that the Industry gets a level playing field as is given to other industries, in tune with liberalised policy. Supplying power at international comparable tariff will help the Industry to utilise its idle capacity, export more and earn valuable foreign exchange for the country.

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