The Hindu Business Line : BHEL Tiruchi in advanced stages of tech transfer

(recently in Tiruchi) “BHEL is on a fast track mode to ensure availability of sufficient capacities to meet the Central Electricity Authority’s planned capacity addition of 78,577 MW during the XI Five-Year Plan” says Mr R.N. Misra, Executive Director of BHEL, Tiruchi.

BHEL’s boiler plant located at Tiruchi completed its capacity augmentation equivalent to an overall manufacturing capacity of 10,000 MW and is now adding further capacities to take the total to 15,000 MW by December 2009.

This augmentation involves 9,70,000 sq ft of expansion for new shops/bays and 76 new machines.

The integrated fabrication facility at Tiruchi has, meanwhile, been increasing its sub-contracting activity to ensure that projects are met on schedule. The sub-contracting activity increased from 1,32,000 tonnes in FY 2007 to 1,68,000 tonnes in FY08. The company hopes to increase this activity by at least 60 per cent for the current financial year.

BHEL has also equipped itself to build large capacity and higher efficiency equipment for ‘supercritical projects’. The Tiruchi plant is at an advanced stage of completion of the technology transfer process for supercritical boilers from French power major Alstom. According to Mr Misra, almost 90 per cent of the technology transfer is complete with over 50 engineers trained over a period of 2-8 weeks. The agreement between the companies requires BHEL to provide some business share to Alstom for the first ten boilers. BHEL is, thereafter; free to produce any number of boilers under the licence agreement, which is valid till 2015.

Expensive initially

This essentially means that the initial set of super critical boilers produced could be marginally expensive, given that BHEL may have to service components from Alstom.

BHEL continues to lead the domestic thermal boiler supply bagging as much as 62 per cent of the orders placed so far under the XI Plan. The company has nevertheless been facing competition from Chinese players as well as new entrants such as Larsen & Toubro. However, interestingly, BHEL Tiruchi’s statistics for utility boiler orders received in 2007-08 show that the company has been the sole bidder in 80 per cent of the orders secured through international competitive bids (ICB). Nearly 11 per cent of the orders that came through the ICB route were secured against Chinese competition and the rest through multi-national competition. According to Mr Misra, the sole bidder status was mostly in the 250 MW and 500 MW capacity boilers where not many players participated due to BHEL’s price competitiveness in the segment.

In 2007-08, BHEL had secured 74 per cent of its total orders for utility boilers through ICB.

The China factor

When questioned on the Chinese players’ aggressive pricing, Mr Misra said that they enjoyed economies from cheaper raw materials as well as standardised products such as 300 MW and 600 MW. “We seem to be the tailors while the Chinese are the readymade garment manufacturers” said Mr Misra.

According to him, as most of the utilities in India go for 250 MW and 500 MW, BHEL could out price them.

However, utilities are now allowed to stretch tenders to an additional 20 per cent (up to 300 MW for instance in case of a 250 MW project). Therefore, on an MW basis, Chinese players could stand to gain.

While the Chinese players could well compete on the price front, they may not necessarily be immune to project delays. The disqualification of a Chinese supplier by the Chhattisgarh State Electricity Board in February 2008, after the former delayed the project by over two years, is a case in point. The order was later awarded to BHEL without inviting any fresh bid.

On the raw material front, Chinese pipes, for instance, could be as much as 20 per cent cheaper compared to domestic prices, opines Mr Misra. The Tiruchi unit has on an experimental basis, procured about 300 tonnes of pipes from China subject to inspection by BHEL and further processing at the Tiruchi plant.

The plant has also been bulk buying in the domestic market and managed to procure at rates earlier committed by the large suppliers. Over the last year and a half, the plant is said to have reduced the variety/grades of pipes procured in order to enable bulk procurement of a particular grade thus securing better prices.

For the quarter ended June 2008, the Tiruchi unit plans to achieve 20 per cent of the target for FY 2008. If it achieves this, it would execute about 60 per cent higher than what was achieved in the same quarter a year ago, in tonnes.

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