Key factors which resulted in consistent growth were capacity and capability building initiatives
BHEL is engaged in the design, engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy.It is ranked as the 12th largest power equipment manufacturer in the world. B. P. Rao , Chairman and Managing Director of BHEL, talks about the challenges faced by the company in a chat with The Hindu . Excerpts.
With your vast experience in industrial engineering, you have been instrumental in conceptualising BHEL’s approach as per the market demand. Can we see some more change in this approach in the near future?
Given the present business environment, particularly in the power sector, we are focusing on increasing our value contribution in a shrinking market. Towards this, we have adopted a two-pronged strategy to sustain profitable growth in the long-term. In the power sector, we will be enhancing our focus on EPC business and enlarging our scope of offer. We have a joint venture with NTPC called NBPPL, and it would be the manufacturing base for certain BOP equipment such as AHP and CHP. We are also working with GE India to offer water management solutions for the power sector. Secondly, smaller business areas such as transportation, transmission, and renewable are getting more attention, so as to maintain a balanced portfolio of offerings. In addition, there would be an increased emphasis on technology and R&D so as to meet emerging business requirements. Of course, capability building is a continuous process for fully realising our manufacturing capacities.
After implementing BHEL’s ‘Strategic Plan 2007’ and ‘Strategic Plan 2012’ successfully, what is next?
Today the business environment has become very challenging. We have numerous issues, both domestic as well as global. I don’t remember the company confronting so many challenges all at the same time, ever. Undoubtedly, this could be a short-term phenomenon. In the medium and long-term, if the country is to achieve higher GDP growth, business prospects are bound to improve. We have tried to address several challenges in our new ‘Strategic Plan 2017’, and aspire to touch the $18 billion mark by 2017. But success is 2 per cent ideation and 98 per cent implementation. So the 2 per cent job is over. I have put in place an implementation mechanism to ensure the other 98 per cent. I am confident of successfully confronting current business challenges to sustain the long-term growth of the company.
BHEL has been investing heavily in research and development. How are you going to leverage this to fuel growth?
We have identified R&D as the key driver of sustaining our leadership position in India. Our value addition is highest among our peer group companies. This is the one major factor which gives us a competitive edge vis-à-vis our competitors. In FY12, we spent Rs. 1,162 crore on R&D, which was around 2.4 per cent of turnover. By FY17, this will be more than doubled. Development of adv ultra super-critical technology is one area where we are actively working. Further, as a part of our long-term plan in this area, we have laid out an R&D policy for the company. Also, several ‘Mission’ projects and ‘Technology’ plans have been drawn to maintain our technology momentum.What factors have helped you register consistent growth, high turnover and profit?
BHEL has registered more than 20 per cent CAGR over the last five years both in turnover and profits. Shareholders’ wealth has multiplied many times in the past. Current stock market is an aberration as business confidence is at an all-time low. Key factors which resulted in our performance were capacity and capability building initiatives which happened during 2007-12. It consisted of manufacturing capability enhancement to 20,000 MW, aggressive recruitment, consistent focus on innovation and various operations improvement measures.
What would be your focus areas to make BHEL a global engineering enterprise?
As of now, BHEL has references in 75 countries, which we will be expanding particularly in MENA countries. Today, our exports cover everything from individual products to turnkey power plants. We are also looking at some global acquisitions to strengthen our technology capabilities or supply chain. As time progresses, we intend to establish manufacturing/ services in certain business areas which can provide synergy to our domestic operations as well as cater to global markets.
Update us on the latest developments to become accountable in the renewable energy segment.
We are targeting a share in the National Solar Mission’s proposed target of 22,000 MW of grid connected solar power.
In this direction, BHEL has signed an agreement with Spain-based Abengoa a leader in solar projects, to provide EPC solutions in concentrated solar thermal power (CSP) areas.
We are also working jointly with IOC and IIT-Rajasthan for development of products and systems in CSP. We set a new record by installing 15 MWp Grid Interactive SPV plants across the country. In the context of the Jawaharlal Nehru National Solar Mission, BHEL is executing orders for renovation and operation & maintenance of SPV plants (aggregate 2.15 MWp) in Lakshadweep.
BHEL has massive capex plans. In such a scenario, where do you see the company in the next five years?
During 2007-12, we spent around Rs. 6,000 crore on our expansion programmes. In future, we have plans to set up Greenfield manufacturing facilities for Railways. We are waiting for things to move in a favourable direction. Apart from this, our focus would be on strengthening our manufacturing prowess. We would also be investing in various joint ventures formed in the recent years. We have crafted new strategies which are now in the implementation phase. You may, perhaps, see a new diversified, bigger and more technology-intensive BHEL ten years from now.
What kind of additional investment is being made towards going green ?
We are an active player in solar and intend to re-enter the wind business. But in India and the world, more than 50 per cent energy is thermal, with coal as the fuel. And, coal would continue to remain as the dominant source of fuel for the foreseeable future. Hence, BHEL, as manufacturer of equipment, believes that the biggest contribution for green energy initiatives is developing energy-efficient, fuel-efficient and environment-friendly equipment for our customers. Our equipment already boasts of world class performance with respect to PLF, operating availability, planned and forced outages.
Efforts are on to further improve the heat rate and efficiency and reduce auxiliary power consumption. This ultimately results in lower fuel consumption per unit electricity produced. Introduction and indigenisation of supercritical technology by BHEL in India is one of the steps in this direction. Jointly with NTPC and IGCAR, we are developing advanced ultra supercritical technology for the first time in India. Other areas attracting investments are commercialization of IGCC and IGBT technologies in power and transportation areas.
With many upcoming projects, you would need a considerable number of skilled people to maintain efficient customer service. . How are you aiming to meet this challenge?
We have recruited more than 20,000 people during 2007-12. BHEL is fully aware that the contribution of all of our talent is an essential component to our performance. Accordingly, we have re-oriented the focus of our human resources to develop not only each person’s competencies, but also their performance and potential in alignment with our ongoing business challenges. We have also done lateral inductions to meet specific requirements. Further, to meet the industry’s requirement of skilled manpower, BHEL has adopted ITIs at Latur, Bajpur, Khandwa and Khaknar. Two more ITIs at Peramvalur and Haridwar are under approval by respective state technical boards.
Further, we, in association with CIL, DVC & SSDA, have set up Kabiguru Industrial Training Centre at Bolpur, Santiniketan to provide high quality technical education. Our welding research institute at Trichy is being leveraged to develop skills. On the whole, things are moving in the right direction.