About 15 ferro alloy and secondary steelmakers are thinking of stopping production or cutting down operations due to increased power bills in the back of fuel surcharge adjustment charges by the power utility in Andhra Pradesh.

Andhra’s 31 ferro alloy units account for 30 per cent of India’s production for the raw material for the steel industry. Four of them have already shut their facilities in the state.

Power accounted for 40-70 per cent of the cost of production, said MR Prasad, secretary general of AP Ferro Alloys Producers Association.

The units in Andhra Pradesh were producing about 2.5 lakh tonne material worth Rs 1,500 crore annually. They consumed about 4,000 kwh power per tonne for ferro chrome and silico manganese and 9,000 kwh for ferro silicon.

The AP government has imposed a FSA of Rs 1.32 per unit, which is being added to the current tariff of Rs 3.65 per unit. FSA is the difference between the cost of service approved in tariff order and actual cost incurred.

According to government, the actual cost of service has been Rs 4.94 per kwh for 2011-12, Rs 4.43 for 2010-11, Rs 4.09 for 2009-10 and Rs 4.26 per kwh for 2008-09.

An increase in price by Re 1 per unit would increase the cost of production by about Rs 4,000 a tonne for ferro chrome and ferro manganese and Rs 9,000 a tonne for ferro silicon, he said. There are about 200 secondary steel producers in the state and they are facing the same problem.