Unsold stock gathers dust in warehouses thanks to stiff international competition

Industry: The decline in demand for ferrosilicon products from India is beginning to show its impact.

With a huge accumulation of stock unsold, one of the industries, Ugyen Ferro Alloys limited (UFAL) in Pasakha, stopped its production on March 26 last week.

The alloy company has a stock of over 2,400MT (metric tonne), which is worth over Nu 150M (million).

Industrialists state that India’s diversion towards China to purchase steel has led to this market situation.  They say India has slowed down on steel production, because it gets “finished steel” from China at rates lower than the cost it spends in manufacturing steel at home.

The demand for ferroalloys, the raw material to manufacture steel, has dropped, affecting the industries in Pasakha, industrialists claim.

As Ugyen Ferro is a foreign direct investment establishment, officials said it would get back to business with the Steel Authority of India limited (SAIL) tender due soon.  Its production is expected to resume in a week’s time.

However, industrialists are concerned at the ever-rising competition in the international market.  Most industries in Pasakha currently have their warehouses full with unsold stock, which industrialists explain would “disintegrate”, if kept for a longer duration and won’t fetch the expected price.

UFAL managing director Thinley Penjor said that today sales were minimal and it was likely that the situation wouldn’t get any better soon.

With the next power tariff scheduled to commence in July this year, industrialists are saying that this wasn’t the best time for their businesses.

Starting July, most companies will have to pay around Nu 2M-Nu 2.5M more as electricity bills a month, which, according to industrialists, would further affect their already-affected industries.

Today, most companies spend about Nu 20M a month on electricity.

Since the industrial sector is among the top contributors of foreign currency earnings, rupee generation is also expected to fall this year if the situation continued.

In 2013, about 31 industries recorded a staggering earning of INR 14.85B (billion).  This was more than what the hydropower plants of Chukha, Kurichu, and Tala combined could generate.  Export of electricity from these plants had generated a total of INR 11.21B.

The 31 industries were also able to generate USD 24.94M.  The industries also paid a tax of Nu 1.06B in 2013.

By Rajesh Rai, Phuentsholing