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Performance of the Ferro Alloy Industry Its present status and the future
-By T. S. Sundaresan
(Secretary General - Indian Ferro Alloy Producer's Association)
Though the growth of the steel industry has not picked up as expected, that of ferro Alloy industry has stepped up more than expected
Performance of the Ferro Alloy Industry is directly linked with the performance of the Steel Industry. The growth of the Steel Industry has not picked up as expected, but the growth of the Ferro Alloy Industry has stepped up much more than the expected level. Ferro Alloys is a highly power intensive industry and electrical energy is considered one of the major raw materials used 24 hours a day, in the production of ferro alloys.
The prices of inputs viz., power, coke and manganese ore have increased by over 100 % during the post liberalised period, which is mainly controlled by Government and Semi-Government organisations. On the other hand, prices of ferro alloys have fallen to the rock bottom in the global market, after 1995-96.
The major ferro alloy producing countries like South Africa, Russia and China are getting advantage from the devaluation of the home currency vis-a-vis US$, by over 50 % in last 3 years. Compared to this, the Indian Rupee has devalued around 6 % in the same time period.
Customs Duty on ferro alloys has been brought down by 80 % during the post liberalised period and the same is at present 25 % basic duty, resulting in increase in imports at very low prices.
Production and exports of ferro alloys for last 5 years are given in Table (I) and (II) respectively. It would be observed from the Table (I) that the capacity utilisation is ranging from 50 to 55 % and the balance 45-50 % is lying idle. Table (III) gives the Imports of ferro alloys upto 1998.
The industry has potential to double its exports, but only due to high power tariff in the country, the industry is unable to compete with international players.
During the post liberalised period, the Industry started facing a number of issues:
1) Excess capacity and low stagnation demand.
2) High power tariff. The power tariff which is available for international players is between 1 to 3 US cents per Kwh, and the same is costing for Indian players around 8 to 9 US cents.
3) Even after a decade of liberalisation, the Ferro Alloy Industry is not given a level playing field, by supplying power at international comparable tariff.
4) Implementation of Anti-dumping duty on Low Ash Low Phos Metallurgical Coke which is not available in the country. Ferro Alloy exporters have to pay ADD on import of Metcoke from China, which increases the cost of production by Rs 1000/- per tonne.
5) USA has already levied preliminary Anti-dumping Duty on exports of Silico Manganese from India into USA, which is going to affect the export performance of the Industry. Understand similar action is being taken by Indonesia, and the investigation on the same is on, for levying preliminary Anti-dumping Duty.
6) Steep increase in input cost - Manganese ore prices have increased by over 100% for domestic producers during the post liberalised period, and the good quality of manganese ore has been exported at very low prices. Increase in railway freight and railway siding charges - Railway freight and railway siding charges have increased every year, which in turn adds to the cost of production of ferro alloys, for domestic market as well as exports.
7) High Excise duty, blocking working capital of the units.
Suggestions to revive the Industry and support solicited from Government:
A) Power to be made available at international comparable tariff, i.e., at US 3 cents per Kwh maximum.
B) Policy to give NTPC/NHPC power from Central Government’s unallocated quota of 15% to be made absolute and mandatory for State Electricity Boards to adopt.
C) Uniform wheeling charges should be prescribed by Central Power Ministry for all SEBs, for wheeling NTPC power, which is at a very high voltage, to Ferro Alloy Industry at reasonable cost of 5% of NTPC tariff.
D) The Industry welcomes the Commerce Ministry’s suggestion to consider input like Power as a basic input for export production, needs to be rebated for Duty Drawback calculations.Government should consider awarding the difference between the power tariff in India and international tariff, which is on an average 200 paise per Kwh as Duty Draw Back on power, for export of ferro alloys, power being the basic input for production of ferro alloys.
E) DEPB Scheme should continue for next 4 to 5 years, till cross-subsidisation of power is totally removed.
F) To implement Counter Vailing Duty on goods imported from neighbouring countries like Bhutan, Nepal etc., wherever Government has free trade agreement under the aegis of Treaty/Agreement, as CVD is Modvatable, and regularise the entire transaction
G) To remove Anti-dumping duty on Low Ash Low Phos Metallurgical Coke imported into India from China, as the same is not produced indigenously.
H) Government should take up with WTO, not to implement Anti-dumping Duty on export of Ferro Alloys to USA and other countries.
I) To waive Customs Duty, Additional Duty and other levies, on Molybdenum Ore / Moly Oxide, Tungsten Ore, Wolframite Ore, Scheelite Ore, Nickel Oxide, Vanadium ore, etc., used in production of Noble Ferro Alloys, as the same is not produced/ available indigenously.
J) Manganese ore prices to be reduced and good quality of manganese ore should be given priority for domestic usage, rather than exporting the same at very low prices.
K) To reduce Railway Freight on movement of all raw materials required for producing Ferro Alloys for domestic and for export purpose, as also on transport of Ferro Alloys from the Factory to the Port of loading for exports.