Power cut makes industry in Andhra uncompetitive

Leave alone new units, even the owners of the existing enterprises are looking towards shifting to other states, particularly Gujarat, Maharashtra and MP

The situation is grave. The prolonged power cut had taken its toll on the industry in the state,” lamented the promoter of a mid-size pharmaceutical company in Hyderabad.

With the cost of diesel power generation being Rs 15-17 a unit, more than thrice the cost of conventional power, his company is incurring an additional burden of about Rs 35 lakh a month on account of acute power shortage.

“We are running in losses. Yet, we are operating our unit because the loss will be more if we keep the plant idle,” the person, who did not want to be named, said.

Not just the private sector, even the public sector Visakhapatnam Steel Plant has lost Rs 450 crore this year as two-thirds of the rolling mills in the state were closed due to power shortage, affecting its sales.

“There has been 50 per cent power shortage for the past 16 months. No one is thinking about setting up a new industry in Andhra Pradesh,” president of The Federation of Andhra Pradesh Chambers of Commerce and Industry (Fapcci), Devendra Surana, told Business Standard.

Leave alone new units, even the owners of the existing enterprises are looking towards shifting to other states, particularly Gujarat, Maharashtra and Madhya Pradesh.

For instance, Hyderabad-based yarn maker Suryalakshmi Cotton Mills (SCM), which proposed to add 50,000 spindles to its existing facility in the state, has changed its plan. It has now decided to set up a new unit in Nagpur at a cost of Rs 150 crore.

SCM is incurring an additional expenditure of Rs 75 lakh to Rs 1 crore a month in terms of increase in power cost for the last one year apart from production loss in peak hours. Consequently, the production cost has gone up by Rs 4 to Rs 5 a kg. “Power shortage is forcing us to hold off our future expansion plans in the state,” company's vice president (finance), P Siva Subramanyam, said.

In fact, a delegation of spinning units from AP is stated to be currently camping in Gujarat exploring the possibility of setting up a private textile park. Same is the case with the representatives of secondary steel units and some producers of pharmaceuticals.

“The industry in the state has become uncompetitive. Producers of most of the products including steel and maida have to jack up prices due to a steep rise in the cost of production. Consequently, material from other states have flooded into our state,” Surana said.

On the other hand, power utilities in the state seem to be indifferent to the plight of the industry. Adding to the woes of entrepreneurs, the distribution companies (discoms) proposed an average 20 per cent hike in power tariff from April, this year.

“The proposed hike is expected to have a burden of Rs 607 crore for the small-scale industry and Rs 4,728 crore for the large-scale industry,” Confederation of Indian Industry (CII) state chairperson, Suchitra Ella, stated.

Already, Ella said, the industry in the state was unable to meet even the minimum production demands due to frequent power cuts and two-three days power holidays in a week. The proposed tariff hike would make the state industry less competitive, she added.

According to chief executive officer of State Energy Conservation Mission, Chandrasekhara Reddy, the power crisis is likely to continue till next year. Due to shortage of fuel and inadequate hydel inflows, the state power utilities could generate only 9,000 Mw as against the total installed capacity of 16,333 Mw.

He said the situation was expected to ease next year with AP Generation Corporation planning to add an additional capacity of 3000 Mw by commissioning four more generating units including the 1,600-Mw Krishnapatnam Super Critical Thermal Power Plant.