The biggest producer of high carbon ferro manganese is Maharashtra Electrosmelt Ltd (MEL), a SAIL subsidiary, has incurred a loss of Rs 11.07 crore during 1998-99 against a profit of Rs 1.64 crore in 1997-98. Sales during the year were also lower at Rs 166.91 crore against Rs 195.69 crore during the previous year.

MEL meets nearly 50 per cent of the needs of manganese alloys of SAIL, both ferro manganese and silico manganese. According to a company spokesman: "The present high power cost in the state does not even allow us to cover our variable costs and we will have to close down in another two or three months if the power cost is not reduced."

The other producers of manganese alloys who are closed are Universal Ferro & Allied Chemicals, Khandelval Ferro and Sandur Managanese. Between the threeof these, the total ferro manganese capacity was around 150,000 to 170,000 tonnes.

In addition FACOR's Garividi unit which used to produce around 10,000 to 15,000 tonnes of ferro manganese is also closed for the last couple of months.

There were also 20 units in the Madhya Pradesh belt producing mostly ferro manganese and silico mangaense. Barring for one or two the rest are closed. If MEL also closes due to losses, there will be hardly anybody left to produce high carbon ferro manganese, except the new West Bengal units. It is stated that the power cost in West Bengal has now been increased to Rs 2.50 and the units there may not be very competitive as they have to incur higher freights on their finished product.

According to MEL and others, the state government of Mahrashtra has increased the power tariff by doing away with the night power concession. The the effective rate works to about Rs 3.70 per unit against the earlier around Rs 280. At this rate production of manganese alloys was not a viableproposition.

MESL, unlike many other units has also not been able to get the cheaper NTPC power for export production.

However, the unit has represented to the state and central government about its plight and hopes a solution will emerge as otherwise imports will become inevitable.

MEL is meanwhile putting them captive power plant of 45 MW based on the line gases of its furnaces and this is being done through the in house technology available with SAIL research set up. This power plant will cost around Rs 12 crore a year in power costs. It is also planning for 6 MW oil based power plant and then add another 30 MW cost-based power plant with which it hopes to become almost self sufficient in its power needs.

Competition may worsen

Meanwhile competition in silico manganese in the market may worsen. The resort tender of Visakhapatnam Steel Plant for about 20,000 tonnes has been bagged at Rs 19,250 per tonne by the private producers. This is considerably lower than SAIL price of around Rs 21,000per tonne given to MEL for silicon manganese and other suppliers a year back.

SAIL is due to call for a tender for ferro manganese and silico manganese shortly which is likely to draw keen competition from both the local and foreign suppliers. The units in Raipur, MP which are closed today, can be revived if they get orders, for, they have very little overheads and can compete against established suppliers like MEL.

Therefore, the competition which has worsted the bigger producers and idled around 200,000 tonnes of capacity is not likely to abate as there is large idle capacity in the industry. For ferro manganese there is no export demand also and the producers have to compete internally.

In West Bengal two new units with a capacity of around 20,000 tonnes are due for start up and can make their product available by September 1999. Some of the ferro chrome units which are producing ferro chrome can also shift their production for manganese alloys, if demand and prices are favourable. Then there is thethreat of imports.

The state of the consuming industry, steel is not good and 180 days credit has become the practice with the buyers, SAIL is no position to support MEL by giving it a higher price than the market price though it may give additional quantities for supplies. This has helped MEL, a great deal and this help will be needed until the unit puts up the captive power plants. In fact SAIL could advance some money to MEL, to put up the captive power plants which it could later deduct from the price of manganese alloys that MESL supplies. Or MEL could get the required finance from any company putting up the power plant against firm offtake by SAIL. MEL management has to rise to the occasion to meet the challenge of the times.