Bharat Heavy Electricals Ltd (Bhel), India's largest power equipment manufacturer, is gearing up for a major transformation in the face of the rupee's depreciation. The company is reducing dependence on imports through enhanced localisation, optimising designs, increasing vendor base and outsourcing works.
For the Rs 50,000-crore engineering behemoth, imported components account for up to 30% of the total production cost.
Of the 27,000 Mw of domestic power gear manufacturing capacity, the company accounts for 20,000 Mw. The power segment contributes 78% to its total sales; the rest comes from the industry segment, including transport and defence equipment.
The rupee's devaluation is adding to weak order inflows and strengthening competition in the local market, its traditional stronghold. So far, the depreciation has eroded gains that could be accrued from the rise in import duty on power equipment to 21% announced last year. "We will protect ourselves by reducing the cost, insurance and freight (CIF) component. Also, costs would be saved through increased localisation and other measures. We did manage to pull down our materials cost four% in the first quarter," a senior Bhel executive told Business Standard.