Secondary Steel Units Under Duress Due to Cheap Imports And High Power Costs

15 February 2016

Numerous secondary steel factories and units in several Indian states are being compelled to shut down because of cheap imports, scarcity of demand and skyrocketing electricity costs.

The few surviving units are also operation far less than ideal conditions and are on the threshold of closure, despite the Indian government’s “Make in India” initiative being underway. In the opinion of small steel plant owners of Punjab, Maharashtra, West Bengal and Madhya Pradesh, more cost-effective options for procuring electricity could have been instrumental to their survival.  

This predicament also resonates in the textile and cement industry across innumerable states where factory-owners are facing an identical crisis.  

Spot market prices have plummeted to less than a rupee per unit in non-peak hours, while the average price is Rs 2.2 per unit.

Over half of the induction furnaces in Mandi Gobindgarh and the Ludhiana areas of Punjab have gone bust in the time span of last few months.

Sandeep Jain, president of the All India Induction Furnace Association, said, “ Demand for steel and related products is low since new projects in housing, manufacturing, auto and infrastructure sectors are not taking off.”

“Cheaper imports from China and Korea have posed a threat to the domestic steel industry. Ancillary steel industries could have survived but for stringent regulations and additional charges on buying power from electricity exchanges,” he further stated.

Punjab shows the highest industrial power tariffs in the country at Rs 9.33 per unit during peak hours and Rs 6.33 per unit in the daytime.

Electricity regulatory commissions in a majority of the states levy open access charges on their industrial consumers as a preemptive measure against them purchasing power from spot markets.

Going by the Electricity Act 200, open access is a reform which makes it possible for buyers to opt for a suitable source of electricity and granting them transmission as well as distribution rights.

“Subsidized electricity is crossed by several industrial consumers in states such as Maharashtra and Gujarat to give access to millions of agricultural consumers,” said Central Electricity Regulatory Commission ex-chairman, Pramod Deo.

"It is a political issue," he added, “Open access cannot be implemented until the industrial consumers stop subsidizing free power given by states to farmers."

The debates and discussions are incessant on this subject but the secondary steel units are at the centre stage of this plight. Solutions should be drawn forthwith, according to factory-owners.


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