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BHEL will grow exports by six times in 5 years

Source : SIFY
Last Updated: Mon, Feb 18, 2008 02:44 hrs
Budget 2008, Run up to budget

How has the journey been so far? We plan to be a Rs 45,000 crore company by 2011-12. With all the positive developments in the economy, the power sector is poised for exponential growth, opening up opportunities for us and other players. As India moves progressively towards becoming a major manufacturing hub, there are undeniable advantages in favour of Indian companies.

We are in the same position as Maruti was 10 years ago but it has still survived and is growing. In fact, BHEL's history and growth symbolise the country's overall growth. It has made India the only other developing country besides China to produce the full range of electric power generation and transmission equipment.

How far is BHEL prepared to meet the power requirements during the 11th Plan since capacity addition of 78,577 MW is envisaged during the period ?

BHEL is confident of meeting the commitments. For the XI th Plan, orders worth 35,000 MW have so far been placed on us. We have completed manufacturing capacity expansion to 10,000 MW as of December 2007 which will be enhanced further to 15,000 MW annually till December 2009. The enhancement of manufacturing capacity is, in fact, facilitated by the availability of basic infrastructure and qualified manpower as well as skills developed through four decades of hardwork - a feat not given to replication in a short time. Further, all these are brownfield expansions and do not require land and most other clearances.

Next, BHEL has taken all preparatory steps and has tied up technology for higher rating (up to 1000 MW) thermal sets based on supercritical technology with Alstom France for steam generator sets (boilers) and with Siemens AG Germany for steam turbine generator sets. The company has already started on the technology absorption and is confident of taking part in projects with supercritical parameters.

BHEL is also ready with introduction of advanced gas turbines for which orders have also been bagged against international competitive bidding.

The company has been at the centre of criticism for the shortfall in the 10th Plan targets in the power sector. How far is it justified?

The shortfall has been on various accounts, most of which are not attributable to BHEL. Non-availability of gas linkages and delay in environmental and investment clearances were key factors for the shortfall. In addition, delays on the part of project developers in awarding implementation contracts caused slippages in the scheduled commissioning of a significant quantum of envisaged power generation capacity addition. About 11,000 MW of generation capacity addition slipped from the power ministry's planned programme because of these factors … which were beyond BHEL's control.

Against a capacity addition target of 41,110 MW during the 10th Plan, orders for less than 50 per cent were placed on BHEL. In a majority of the cases, BHEL's contractual obligations were limited to supplying and erecting power generating equipment and did not include project associated works like civil construction. There have been numerous cases of delay in provision of critical inputs.

BHEL still completed power generation projects worth 14,912 MW during the Plan – 80 per cent achievement of the orders on BHEL. In addition, BHEL had also commissioned the 1,020 MW Tala hydro project in Bhutan. In comparison, other contractors achieved commissioning success of only 53 per cent in the plan.

Do you think the government should have some kind of special dispensation for power plant builders so that more capacity is created in the country?

Bunching of orders in the later part of the plan has been one of the main reasons for slippages. A balanced approach needs to be adopted where fresh capacity addition has to be spread proportionately with the first two years accounting for the entire ordering. This would facilitate planned execution of the orders through optimum utilisation of manufacturing facilities, thereby avoiding delays.

Should it be only for Indian companies, especially when it comes to trying out supercritical technology? Or should Indian firms are required to have a tie-up with foreign companies for availing of the benefits?

When the 500 MW rating sets were introduced in the country, bulk orders were placed on BHEL for facilitating smooth transfer of technology into the country. This enabled the company to win subsequent orders on competitive bidding basis. The country today is reaping its benefits with these sets forming the backbone of the country's power generation.

In case of supercritical technology, BHEL has taken all preparatory steps and has tied up technology. The company has already started on the technology absorption and is confident of taking part in projects with supercritical parameters.

The issue, therefore, is to sufficiently absorb and indigenise the supercritical technology through executing a certain minimum number of projects, instead of importing equipment and compromising the country's energy security.

How important is the power business for BHEL's total portfolio?

When we look at segmental turnover, power business contributes to about 72 per cent of our sales. Three-fourth of the total electrical power produced in the country is on account of the power capacity established with BHEL-made sets. With the strong economic growth and the higher growth rates required in the power sector, power business will continue to be the most important constituent of BHEL's portfolio in the coming years also. As per the strategic plan 2012 adopted by the company, we envisage Power Sector to contribute 70 per cent to the company's turonver by 2011-12 with 30 per cent contribution from Industry related businesses.

What are the new business areas the company is looking at for expansion?

Apart from introducing supercritical technology, BHEL is also ready for introduction of advanced class gas turbines. Necessary initiatives are being put in place to gain from the emerging opportunities in transmission and transportation business segments. Globally, distributed power generation viz. wind energy, solar energy (photovoltaics, photothermal) and fuel-based distributed power generation based on mini turbines and reciprocating engines is gaining importance. To make energy supply more viable for the future and to use the energy resources more efficiently, BHEL is engaged in efforts to remain in step with contemporary technology trends in the international arena.

BHEL is one of the few companies worldwide involved in the development of integrated gassification combined cycle (IGCC) technology which would usher in clean coal technology.

BHEL has set up Asia's first 6.2 MW IGCC power plant with indigenously designed pressurised fluidised bed gassifier. Efforts are under way in scaling this up to a 125 MW IGCC power plant.

BHEL is already a pioneer in the solar photovoltaics and hydro electric energy, and will be concentrating on hydrogen energy technologies especially in the area of fuel cells.

What are BHEL's plans for overseas market?

Over the next five-year period, in the pursuit of achieving globalisation aspirations, BHEL aims to grow the physical exports by six times the current size. Physical exports are expected to contribute around Rs 6,000-7,000 crore to the company's turnover by 2011-12. Mergers and acquisitions route is also being pursued to avail of inorganic growth opportunities in order to enlarge the company's operations both in domestic as well as export markets.

Some analysts said BHEL's order book position will decline once ordering for XI plan projects are over. How far is it true?

It is estimated that in the energy sector alone, India needs to invest about $1.25 trillion in energy infrastructure between 2006 and 2030. What is particularly noteworthy is that three-quarters of this outlay is to be in the power sector. The XI Plan envisages a 78,000 MW capacity addition. The XII Plan envisages a capacity addition of 82,000 mw. Further, the Integrated Energy Policy document envisages capacity addition to go up to 960 giga watt in 2031-32 under a 9 per cent GDP growth scenario. All these point towards a continuous growth opportunity in this sector. BHEL is well poised to meet the emerging demand. Even if the XI Plan related ordering tapers down, the ordering for the XII Plan related projects will begin.

How big is your gas-based power business and what are your plans for nuclear power business?

Gas-based power plants form an important part BHEL's power business, especially in the overseas market. Though the focus is presently on coal-based projects in view of the volatility of gas prices, BHEL is geared up to introduce advanced class gas turbines. We have recently won an order for setting up a captive power plant in Maharashtra on EPC basis, involving supply and commissioning of an advanced class Fr.9FA gas turbine for Reliance Industries Ltd.

With regard to nuclear power business, BHEL has access to technology for manufacturing steam turbines and turbo-generators up to a rating of 1000 MW. Currently, 80 per cent of the country's nuclear-based electricity is from BHEL sets. The largest size executed by BHEL is 540 MWe.

It has also been said that BHEL is not competitive as far as pricing is concerned. What in your view should be the approach as far as costing is concerned in setting up power projects since fuel cost has increased manifold?

The fact that most orders won by BHEL are on the basis of international competitive bidding is a testimony to its competetiveness. As far as project cost is concerned, main plant equipment that BHEL manufactures constitutes only about 50 per cent of the total power plant and the rest includes "balance of plant equipment" like coal and ash handling systems, water treatment plants, cooling water systems, air-conditioning and ventilation systems, cooling towers, construction equipment, civil works and services, etc. To bring down project costs, it is necessary for the project developers to standardise equipment ratings and place bulk orders to bring down costs on the basis of economies of scale.

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