B. Prasada Rao Chairman and Managing Director, BHEL

Bharat Heavy Electricals Ltd, the public sector engineering and manufacturing company, has said that some of its ongoing projects had been affected as the Indian power sector continued to be “besieged” with issues relating to fund constraints, land acquisition, clearances and coal linkages. This was stated by B. Prasada Rao, Chairman and Managing Director, BHEL, at the company’s 50th AGM held in Delhi recently.

The problems over coal linkages for power projects are likely to exacerbate further after the Supreme Court cancelled 214 coal blocks out of the 218 coal blocks allocated since 1993, which, in turn, could impact Rs. 2.85 lakh crore of project investment in the coal and power sectors.

BHEL is, however, trying to turn adversity into opportunity. As the company noted, “These testing times in recent few years have given BHEL the opportunity to consolidate its strengths, identify areas for future growth and leverage on the intrinsic capabilities to build strong foundations for the coming years. The company will achieve this through the anchors of capability enhancement, project execution, cost competitiveness and quality, diversification, engineering and technology, and people development as per the six-point agenda.”

According to the BHEL CMD, fiscal 2013-14 was the second successive year of sub-5 per cent growth, though the economy marginally improved compared to 2012-13 with GDP growth of 4.7 per cent.

“Persistent inflation, high fiscal deficit and high interest rates have negatively affected the growth potential. The cutback in investments, slow momentum in infrastructure and energy sectors, and delayed and stalled projects have also contributed to the performance that was below expectations. Investment and capital expenditure by the industry slowed down,” he observed. “However, as the economy is expected to move at prerecession levels in near term, the capital expenditure cycle could kick off in a big way in the next few quarters. This will improve business environment and BHEL will benefit from emerging opportunities.”

In spite of fiscal 2013-14 being an “extremely challenging year,” BHEL said it had succeeded in achieving a turnover of Rs. 40,338 crore and a net profit of Rs. 3,461 crore resulting in a net profit margin of 9 per cent which was higher than many industry peers.

During the year BHEL also synchronised and commissioned all-time high power projects of 13,452 MW, the highest in a single year. This included commissioning of 11,266-MW in utilities comprising nine 600-MW sets, 1,698 MW in captive and industrial sets, and 488 MW in overseas markets.

Prasada Rao said that despite the unfavourable climate, BHEL had won orders worth Rs. 28,007 crore for its diversified business segments like power and industry covering both domestic and international markets. The company also increased its market share from 68 per cent in 2012-13 to 72 per cent in 2013-14 which included the highest-ever mega EPC contract worth Rs. 7,900 crore for NTPC’s 3×660 MW North Karanpura supercritical power project in Jharkhand. As on March 31, 2014, the total orders in hand for execution in 2014-15 and beyond stood at Rs. 1,01,566 crore.

With a manufacturing capacity of 20,000 MW of power equipment per annum, BHEL has capability to manufacture the entire range or type of power equipment. Power stations with BHEL-supplied equipment enjoy a 57 per cent share in India’s total installed power generation capacity and contribute 65 per cent to the total generation from coal-based thermal utility sets.

For instance, in 2013-14, overall PLF of BHEL-supplied coal-based sets at 66.9 per cent was higher than the national average of 65.6 per cent including 36 sets which registered PLF of over 90 per cent. Some 175 BHEL coal-based sets achieved OA (operating availability) higher than 90 per cent. The company supplied nuclear sets registered an OA of 88.6 per cent and PLF of 81.5 per cent in the last fiscal.

In recent years, BHEL has augmented the manufacturing capacity of its power plant to 20,000 MW per annum, that of locomotive manufacturing to 75 numbers per annum, and seamless steel tubes to 86,500 tpa.

Besides, its new manufacturing units, namely centralised stamping unit at Jagdishpur, Uttar Pradesh; power plant piping unit at Thirumayam, Tamil Nadu; power equipment fabrication plant at Bhandara, Maharashtra; and merger of BHPV Vizag, Andhra Pradesh, are part of measures to scale up operations.

The company has also strengthened its execution capabilities with various initiatives such as addition of 129 heavy cranes at project sites suitable for erection of 600/660 MW sets.

In the transmission business area, BHEL constructed and commissioned 765/400kV substation at Raichur, Karnataka, six months ahead of schedule. This is the southern end of the 765kV Raichur-Sholapur transmission link of PGCIL. With this, the Southern Grid is now synchronised with the N-E-W Grid, thus forming the synchronously operated National Grid and fulfilling the One Nation-One Grid-One Frequency goal.

In light of the shrinking market, BHEL is adding value by increasing focus on EPC business and enlarging its scope of offer. The company is expanding its portfolio by adding flue-gas desulphurisation, water management systems, air cooled condensers, and other balance-of-plant systems to its portfolio. It is also fully harnessing its potential in the spares and services area, forging partnerships with power plant developers for ultra mega power projects, increasing level of indigenisation in supercritical technology, developing advanced ultra supercritical power equipment, and introducing state-of-the-art CFBC technology.

BHEL is already expanding its presence in transportation (rail), solar and transmission areas by way of investment in existing facilities and exploring new business models. The company plans to set up an integrated manufacturing facility for 480 MW solar PV systems in Maharashtra. It is also pursuing capacity expansion (locos), product development (765 & 1200 kV transformers), collaborations (water business) and new technology areas (North-East Agra, a ±800kV transmission superhighway) to enhance its share of industry segment.

Elsewhere, BHEL has augmented its capabilities to manufacture up to 300-MW hydropower sets and synchronised India’s first 1,000-MW nuclear set at Kudankulam-1 in 2013.

“Creating new business avenues and maximising the utilisation of available infrastructure will be the key to future growth and stakeholders’ wealth enhancement. The new and changing India will have an insatiable appetite for a wide range of products and services offered by BHEL. Therefore, the company is confident of realising its vision of becoming a global engineering enterprise providing solutions for a better tomorrow,” Prasada Rao added.

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