Companies

Mismanagement of strategy led to losses in BHEL: CAG

Our Bureau New Delhi | Updated on January 09, 2018 Published on August 08, 2017

The Comptroller and Auditor General of India has rapped Bharat Heavy Electricals Limited for not diversifying appropriately and losing out on revenue because of the same. The CAG has pointed out inadequacies of efforts for diversification, increasing competitiveness, and improper management of receivables at BHEL. These discrepancies have been highlighted in the auditors report on “Competitiveness of BHEL in Emerging Markets” that was tabled in Parliament on Tuesday.

In an official statement, CAG said, “As the decade ending 2010 posed challenges to BHEL in the form of climate change, increased competition and squeezed delivery schedules with emergence of new competitors, BHEL’s turnover declined sharply after 2012-2013 and the Company reported a loss for the first time in 2015-2016.”

The report notes that there was inadequacy of efforts for diversification at BHEL. CAG notes, “Power sector continued to account for the bulk (76.46 per cent to 80.83 per cent) of BHEL’s turnover during 2011-2012 to 2015-2016.” The report states that as BHEL had not effectively diversified into new or less operated business areas, both turnover and profitability declined sharply with slowdown in power sector.

BHEL’s turnover which was Rs 49,510 crore in financial year 2011-2012 declined to Rs 26,587 crore in 2015-2016. The profits of Rs 7,400 crore in 2011-2012 turned into a loss of Rs 913 crore in 2015-2016 according to the CAG.

CAG also notes that BHEL had fixed Strategic Plan targets from 2012 to 2017 with focus on diversification and innovation. But the public sector undertaking did not set any year wise milestones for implementation of the envisaged strategies. This resulted in BHEL not achieving any of the strategic plan targets till 2015-2016 and the shortfall ranged between 23.33 per cent and 113.91 per cent against specific goals.

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Published on August 08, 2017
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