Bharat Heavy Electricals Limited, country's main manufacturer of power equipment, has been blamed for the under performance of the power sector over the last five years, when about half the targeted 41,000 mw of power generation capacity was added. Defending the company, Chairman and Managing Director Ashok Kumar Puri tells Business Standard that the problem lies elsewhere -- in the balance-of-plant equipment rather than in the boiler-turbine-generator sets which the company manufactures.
The under performance of the power sector has been attributed to the inability of BHEL to supply equipment in time. In fact, the company's maximum supply of equipment in the last five years was in 2006-07, for about generating 5,000 mw only.
That is not true. Currently, BHEL has the capacity to manufacture equipment to generate 6,000 mw, which will go up to 10,000 mw by December 2007. In 2006-07, we have manufactured and supplied power equipment close to 7,000 mw. We have worked beyond the capacity, on a 3-shift basis at our critical facilities for extra output.
There has also been a shortage of components which string together the main BTG set that makes up the heart of the power plant?
This is one issue facing the power sector as a whole. When the country as a whole is moving from one level of capacity addition to another, we need to create capacities not only for BTG, which we are doing very aggressively, but also for other equipment such as coal handling plants, ash handling plants, air conditioning equipment, fire fighting equipment, and a host of other balance-of-plant items.
We have not seen much movement on this front up to this point. We are trying to do our bit to educate vendors and contractors (of which there are hundreds across the country) to build up capacities. But the private sector entrepreneurs do not invest money until they are sure that there is gong to be a sustained market. The progress in the power sector over the last few years should give them that confidence.
You have a bursting order book of Rs 55,000 crore (Rs 550 billion). Is that a potential dampener for prospective clients, especially with the power ministry asking utilities to look at order books (and waiting periods) before placing orders?
In the last three years, we have more than doubled our turnover to Rs 18,700 crore (Rs 187 billion). We are increasing our capacity and capabilities all the time, on an unprecedented scale. Our track record shows that we can deliver.
If I were to place an order today for a conventional boiler, how long would it take for you to deliver?
Today, worldwide, there is a boom for power plant equipment. It is a rare time in world history when you have north America, Europe, China, the rest of Asia and even Gulf and Russia adding huge capacities. Manufacturers worldwide are full for the next four years on an average. We are only booked for two years. In fact, we are therefore more hungry (for orders) than our counterparts in the rest of the world. We need to book more orders for 2009-10.
There is a perception that you are losing out in the market for super critical equipment (large-sized units, which are more efficient and more expensive than conventional units). The first contract from an ultra mega power plant -- Tata's Mundra -- has gone to South Korea's Doosan...
Doosan and Tatas tied up much before the bids were submitted. The understanding between the two is almost six months old. In fact, no new contracts for super critical Equipment have been awarded to anyone for the last 12 months. The market is yet to pick up.
When did BHEL achieve the capability to supply super critical units?
We have been ready to bid for a project for more than one year.
Apparently, BHEL is not as cost-competitive as the Chinese. According to some analysts, you have conceded that the Chinese have a 20-30 per cent cost advantage...
That is because of their quality. We had re-examined Sasan (the winning bidder Lanco had already decided to go with the Chinese supplier Dong Fang). The boiler could be redesigned and the price brought down by 20 per cent. But it depends on the design and quality you offer. I can't take a short-term view on this business. My equipment should perform and not give problems in a few years' time.
Who is on your list of prospective clients?
When the nine ultra mega power plants come to the market for equipment, there will be opportunities. Besides, there are a few states like Andhra planning to set up super critical units on their own. NTPC is also planning to set up super critical units.
And will the lack of a track record in super critical units be an issue with clients?
We have very strong collaborators. Both Alstom and Siemens put together have enormous experience worldwide which is available with us.
