The Hindu Business Line : BHEL to re-enter small boiler segment

The public sector power equipment manufacturer had stopped making small boilers years ago to focus on large utility boilers used in thermal power plants. Small boilers, which can produce 35 tonnes to 200 tonnes of steam an hour, find application mainly in captive and co-generation power plants with capacities ranging from 10 megawatts (MW) to 60 MW.

BHEL's presence in this Rs 2,000-crore industry is `almost negligible.' The small boilers industry is dominated by Thermax and Cethar Vessels. Now, the company wants to make amends."The market is large and can provide growth opportunities for BHEL," said BHEL's Executive Director, Dr V. Gopalakrishnan, who heads the boiler unit at Tiruchi. He has told the BHEL top brass in New Delhi that with " its capability, market perception and stature ," the company should aim for a 50 per cent market share. Dr Gopalakrishnan felt that an additional business of Rs 1,000-crore is at hand.

BHEL's competitors seem unconvinced by such moves. "They cannot compete against us," said Mr K. Subburaj, Chairman of the Rs 325-crore Cethar Vessels Ltd, which is also based in Tiruchi. Mr Subburaj, an ex-BHEL official himself, pointed out that while the PSU is a "great organisation," it is not nimble enough to take quick, cost-saving decisions. Cethar Vessels, with enough orders at hand, is set to achieve a turnover of over Rs 800 crore in the current year.

But Dr Gopalakrishnan has some tricks of his own up his sleeve. One, standardise designs for some boiler capacities — say 80 and 120 tonnes (of steam) per hour. This will cut production time, save costs and enable BHEL to take on well-entrenched competitors. Second, work with ancillaries and get the small boilers fully manufactured by them and sell the products under the BHEL brand name. "Only critical components, as and when required, can be done in our shops."

BHEL could then get a licence fee for its brand name. Dr Gopalakrishnan said that there are many customers who will buy only BHEL products if they can help it. If four-five manufacturers could be licensed, many boilers could be sold under the BHEL label.

"It is an excellent idea," said Mr B. Pattabhiraman, Managing Director, G.B. Engineering Enterprises Pvt Ltd, a Tiruchi-based fabricator. Fabricators such as G.B. Engineering said that BHEL could be made more nimble by outsourcing production.

But then, would such a model get BHEL only a licence fee, not turnover? True, but the larger issue behind the `small boilers strategy' is not merely sales, but keeping rivals at bay.

Players such as Thermax and Cethar Vessels have now started looking at larger boilers, traditionally BHEL's forte.

Cethar Vessels has come up with a design of its own for a fuel-saving, `circulating, fluidised, bed combustion' boiler.

Mr Subburaj said that if there are no takers for the boiler, Cethar Vessels would put up a 125-MW plant on its own to demonstrate the product's worth.

Dr Gopalakrishnan's answer to such challenges is to take on the competition head on and invade the rivals' turf.

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