The BL Interview. ‘Competition from China is no longer a threat for BHEL’

Bharat Heavy Electricals Ltd (BHEL), India’s State-run power equipment maker, is facing tough times. Though the order book is sound, the slowdown in the power sector and troubles in coal fields have put pressure on the company’s growth curve.

At the helm, confronted with many more challenges, is B Prasada Rao. Having steered BHEL for five years, Rao got a rare extension for two more years from January 1, 2014. In an with Business Line , he explained the reasons for the tight situation and steps to bounce back.

Your turnover, order book and finances are under strain. What factors have led to these difficult times?

Yes, BHEL finds itself in a challenged situation. We crossed a record turnover of ₹50,000 crore during 2012-13. However, in FY-14, there was a dip and we ended up with just over ₹40,000 crore. Our order book, however, is healthy at ₹1.1 lakh crore.

There are a number of reasons for this, such as general economic slowdown, the sluggishness in the power sector, coal availability, land issues, environmental aspects and lack of funding for infrastructure projects.

Despite these issues plaguing for the past four-five years, a strong order book till fiscal 2010-11 kept BHEL going. We still command a market share of 72 per cent. The capacity additions in the power sector have been significantly falling with just 8,000 MW during 2012-13.

What are your expectations from the new Government?

I am positive on the power sector turning around. Isn’t it a paradox that nearly 50 per cent of the people still need to be provided reasonable power and we see de-growth in it?

This cannot continue. The initial actions of the new Government indicate that the power sector will be on their priority list. This is a big hope for us. During 2013-14, a total of 13,000 MW were commissioned.

The Indian players in the power sector faced stiff competition from China. Have you been able to cope up with this?

Yes, in the first few years of the last decade, Chinese manufacturers did give a run for our money.

However, today, we are geared up to face the situation. Chinese competition is fine. We can easily compete on equipment, prices and technology strengths. I can say confidently that China is no longer a major threat for us.

What is your strategy to regain the lost ground in turnover and become a versatile player?

We have firmed up a diversification programme that should see us grow in the long term. The areas identified are rail transportation, renewables, strategic areas such as defence, nuclear and water business. Rail transportation will be the first big growth area. We plan to make full train sets with our capabilities in electromotive and propulsion systems. Have signed an MoU with the Indian Railways.

Under this, a manufacturing unit with an investment of $185 million is being set up in Rajasthan to make MEMU (mainline electric multiple units), a commuter rail system.

In solar energy, we will come in a big way. At present, it’s populated by small players. BHEL will establish a 500 MW solar photovoltaic (SPV) plant.

It calls for an investment of ₹2,700 crore. Funds will be a mix of internal accruals and sourced from the National Clean Energy Fund. The inter-ministerial group has cleared and we are awaiting final approval from the CCEA (Cabinet Committee on Economic Affairs).

Your progress in nuclear and defence has not been strong. How do you look at the near-term prospects?

In the nuclear power sector, prospects will depend hugely on the Government and the market.

We hope the new Government will give it a push.

At present, we are executing turbine orders for four 700-MW power plants of Nuclear Power Corporation.

However, in defence, we will make a big splash. Many opportunities exist in naval guns, field gun, aero engine technology and multi-million dollar projects that the Ministry of Defence has. At present, our revenues are small, but will give a thrust.

The BHEL-HAL (Hindustan Aeronautics Ltd) joint venture is in initial stages for developing aero engine technology.

We can get into the ambitious development and manufacture of the indigenous field gun for the Ministry of Defence.

India has been dependent on the imported Bofors Howitzer’s for long.

How do you propose to leverage R&D to make BHEL more competitive globally?

Our Corporate R&D has been filing one copyright/patent per day for the past few years.

We have R&D at all units of BHEL. We have established several centres of excellence. It has emerged as the backbone of our developments and we will shortly give it a significant fillip.

If the supercritical technology for ultra mega power plants is a stronghold, we have made considerable progress in developing Advanced Ultra Super critical technology for coal-based plants.

We hope to free the design of the turbine and boiler by 2017 and set up the first plant by 2020.

BHEL, NTPC and IGCAR (Indira Gandhi Centre for Atomic Research) have joined hands.

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