Analysis of business of BHEL in the

light of Corporate Monitoring

BHARAT HEAVY ELECTRICALS LIMITED

SIRIFORT, NEW-DELHI.
A report in partial fulfillment for the degree of
Masters in Business Administration
BY

TABISH SOHAIL

MBA 2013-15,AMU

Under the esteemed guidance of

Shri Yasbir Singh

AGM (MON)
&
Shri Ayush Gupta
Engineer (MON)

Declaration
I, Mr. Tabish Sohail hereby declare that this project report is the record of authentic work
carried out by me during the period from 4th June, 2014 to 4th August, 2014 and has not been
submitted to any other University or Institute for the award of any degree

Tabish Sohail
13 MBA 50

Date : 4th August,2014

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. Tabish Sohail, a bonafide student of MBA, Faculty of
Management Studies and Research, Aligarh Muslim University has undertaken eight weeks
training from 4th June, 2014 to 4th August 2014 in Corporate Monitoring Division of BHEL.
During his training in BHEL, he undertook a project entitled, Analysis of business of
BHEL in the light of corporate monitoring. The project is an original work of Mr. Tabish
Sohail.
Mr. Tabish Sohail was sincere and well disciplined during the course of his training.He was a
keen learner
I wish him a very successful and bright life.

Yasbir Singh
(Additional General Manager Corporate Monitoring)

ACKNOWLEDGEMENT
With profound respect and gratitude, I take this opportunity to convey my heartfelt gratitude
to various individuals involved in making this training a truly learning and enriching
3

experience. I hereby take this opportune moment to express my deep thanks to our
Department Head Shri BabuLal, GM (Mon) for his support.
I convey my profound thanks to Shri Yasbir Singh (AGM), Shrimati Kamlesh Kelkar, Shri
Ayush Gupta (Engineer) for their profound guidance, support and encouragement.
Besides, I express my sincere thanks to all the members of Corporate Monitoring and
Marketing Department, all the people who one way or the other, directly or indirectly as well
as HR Department for constant support and their friendly and helpful attitude.
I am deeply thankful to the Dean and Chairman Respected Prof. Mohammad Israrul
Haque for providing me this golden opportunity and the much required motivation,
Respected Dr.Feza Tabassum Azmi for helping me throughout my training, Respected
Dr. Asif Akhtar for supporting me in the hours of constant perseverance and the entire
faculty, Department of Business Administration, AMU for their sincere guidance in
finalizing the project and giving suggestions which has helped me in completing my
project.
As people say youre what your friends let you be. I take this opportunity to thank all
my friends for their invaluable support and cooperation.
I am extremely grateful to my family for their invaluable support and encouragement
throughout the course of my life. Above all I am thankful to Almighty for giving me the
desire, ability and zeal to fulfill the completion of this project.
Tabish Sohail

EXECUTIVE SUMMARY
Purpose of study
The study was commissioned to examine the factors responsible for success of Chinese
power generation equipment manufacturers in India.
4

Background:
Till Recently, BHEL dominated the market but with the Chinese stepping in things started
changing. The Chinese in a matter of few years grabbed a significant market share. BHELS
market share increased but not in proportion with the increase in the market size.
Trend Observed:
BHEL has managed to retain its strong hold as far as central and state power producing
companies are concerned. On the other hand it has lost significant market share in private
sector companies. Independent power producer (IPP) contract are being successfully bagged
by Chinese companies adding this to the fact that the capacity of power project under IPP
have increased significantly, it is important that BHEL analysis the facts responsible for
success of Chinese. Government of India has ambitious plans for capacity addition during
12th fifth plan and it means potential business for power generation equipment
manufacturers.
The study identified the following factors responsible for IPPs switching to Chinese:
Lower Price Shorter
Delivery Period
Easy Credit Availability for Buyers
Factors contributing towards achievement of cost leadership:
Labor
Trade Policies
Credit Availability
Raw Materials
Infrastructure Performance

Recommendations

 BHEL should influence government to levy Heavy Duty on import of power

generation equipment
Promotion of importance quality (as BHEL provides high quality products and
Chinese do not)
BHEL should influence the government to provide easy and cheaper credit tackle
tough competition from chinese
BHEL should look into how it can reduce its delivery schedule
BHEL should influence the government to development infrastructures such as roads
and highway as it will help in increasing competitiveness of manufacturing industries
and enhance its logistics performance.
Increase value addition of labor in BHEL to increase productivity there by become
more competitive
Optimize value chain. With the beginning of new era in power generation equipment
manufacturing industry, BHEL should analyze its value chain and should find out the
areas where there is scope for optimization
Further vendor development, BHEL should try to increase its vendor base as it will
help in reducing costs
Global sourcing. BHEL should go far global sourcing and it should look towards
foreign economic to source inputs at lower price
BHEL should try to enter into long term contracts for procuring raw materials at fixed
low rate

Contents
Chapters
Topic
Executive Summary
Chapter 1
Industry Profile
Chapter 2
Company Profile
Chapter 3
Research Methodology
Chapter 4
Balance Score Card Analysis
Chapter 5
Business and Marketing
Chapter 6
Special Findings and Loopholes
Chapter 7
Recommendations & Conclusions
Annexure
References

Page
5
10
21
42
47
57
85
88
92
94

VISION
A world-class, innovative, competitive and profitable engineering enterprise providing
total business solution

MISSION
To be the leading Indian engineering enterprise providing quality products system and
services in the fields of energy, transportation, industry, infrastructure
potential areas
VALUES
Meeting commitments made to external and internal customers
Foster learning, creativity and speed of response
Respect for dignity and potentail of individuals
Loyalty and pride in the company
Team playing
Integrity and fairness in all matters.
9

and other

Chapter 1
INDUSTRY PROFILE

10

Introduction
Bharat Heavy Electricals Ltd. (BHEL) is the largest engineering and manufacturing
enterprise of its kind in India and is one of the leading international companies in the
energy related and infrastructure sector today. BHEL's operations are organized around
three business sectors namely Power, Industry and Overseas business and is engaged in
the design, engineering, manufacturing, construction, testing, commissioning and
servicing of a wide range of products and services for the core sectors of the economy,
viz. Power, Transmission, Industry, Transportation, Renewable Energy, Oil & Gas and
Defense.
BHEL was granted the Maharatna status on 1st February 2013 by the
government of India making it one of the only 7 mega Public Sector Undertakings
(PSUs) of India clubbed under this esteemed status.
BHEL is the 7th largest power equipment manufacturer in the world. In the year 2011,
it was ranked ninth most innovative company in the world by US business
magazine Forbes. BHEL is the only Indian Engineering company on the list. It is also
placed at 4th place in Forbes Asia's Fabulous 50 List of 2010. It is the only Indian PSU
to be recognized for the second time as Star PSU Company of the year by leading
business daily Business Standard.
BHEL has a well-recognized track record of performance. The company has been
earning profits continuously since 1971-72 and paying dividends since 1976-77.
Bucking the uncertainties surrounding the global economic recovery, BHEL registered
the highest turnover ever and crossed the Rs 50,000 Crore mark for the first time during
the year 2012-13; a Turnover of Rs. 50, 015 Crore and a Net Profit of Rs. 6,485 Crore.
The company has grown in stature over the years with continued inflow of orders,
11

manufacturing prowess, continued thrust on technology leading to a strong presence in

domestic and international markets as a major supplier of power plant equipment
besides establishing substantial inroads in select segment of products in Industrial
sector and Railways.
BHEL has acquired certifications in the domains of Quality Management Systems (ISO
9001), Environmental Management Systems (ISO 14001) and Occupational Health &
Safety Management Systems (OHSAS 18001) and Information Security Management
Systems (ISO 27001) and has made significant strides towards Total Quality
Management as well.

The high level of quality & reliability of its products is due to the emphasis on design,
engineering and manufacturing, expected to match international standards. BHEL is
moving ahead in this direction by acquiring and adapting some of the best technologies
from leading companies in the world, together with technologies developed in its own
R&D centers.

BHEL: Evolution and Growth

Feb 1947: Advisory Planning Board envisaged the need for Electrical Machinery
Industry in India.
Mar 1948: Sir J.C. Ghosh (Exploratory Committee) - set up Heavy Electricals
Generating Equipment Factory in State Sector.
12

 Jan 1955: S.A. Gadkary Committee reiterates the need for Heavy Electrical
Equipment Factory.
Aug 1956: Heavy Electricals (Pvt.) Ltd incorporated, later renamed HEIL (Heavy
Electricals India Ltd set up in Bhopal.
1960's: Three major plants were set up at Haridwar, Hyderabad and
Tiruchirapalli. All these worked as independent units and competed with each
other, till the government decided to merge theseand on 1/1/1974 BHEL came
into existence.
January 1974: HEIL merged with BHEL.
Second Generation Units Vertical Integration - TP Jhansi, CFFP, Hardwar and
SSTP Tiruchy.
Further vertical integration through acquisition of REMCO and MPL
Setting up of third generation units IP Jagdishpur, BAP Ranipet, IVP Goindwal,
CFP Rudrapur
1980s - Formation of Business Sectors Power, Industry and International
Operations

13

Business Focus Areas

BHEL is engaged in the design, engineering, manufacturing, construction, testing,
commissioning and servicing of a wide range of products and services for the core
sectors of the economy, viz. Power, Transmission, Industry, Transportation, Renewable
Energy, Oil & Gas and Defense.

Power Generation

14

Power is the focal area for BHEL and comprises thermal, nuclear, gas, diesel and hydro
businesses. BHEL has taken India from a position of total dependence on overseas
sources to complete self-reliance in power plant equipment. Today, BHEL sets account
for nearly 57 % of the total installed capacity in the country.
BHEL has contracts for supplying boilers and auxiliaries, turbo generator sets and
associated controls, piping and station control & instrumentation of up to 800 MW unit
rating and has the technology and capability to produce thermal sets with higher unit
ratings including 1000 MW. BHEL has access to technology for higher size gas turbines
and can supply gas turbines up to 270 MW unit size. It engineers and constructs custom
built combined cycle power plants, Hydro sets of Francis, Pelton, Kaplan and bulb
types for different head - discharge combinations, with matching generators, are also
designed and manufactured by BHEL.

Industry
BHEL manufactures and supplies major capital equipment and systems like captive
power plants, centrifugal compressors, drive turbines, industrial boilers and auxiliaries,
waste heat recovery boilers, gas turbines, pumps, heat exchangers, electric machines,
valves, heavy castings and forgings, electrostatic precipitators, ID/FD fans, seamless
pipes etc.
These serve a number of industries like metallurgical, mining, cement, paper, fertilizers,
refineries and petro chemicals, etc. in addition to power utilities. BHEL has also
emerged as a major supplier of controls and instrumentation systems, especially
distributed digital control systems for various power plants and industries.

Transmission
15

BHEL supplies a wide range of products and systems for transmission & distribution
applications. The products manufactured by BHEL include power transformers,
instrument transformers, dry type transformers, shunt reactors, capacitors, vacuum and
SF6 switchgear, gas insulated switchgear, ceramic insulators, etc. BHEL has developed
and commercialized the country's first indigenous 36 KV Gas Insulated Substation
(GIS) and has also developed 145 KV GIS which has undergone successful field trials
at Hyderabad. For enhancing the power transfer capability and reducing transmission
losses in 400 KV lines, BHEL has indigenously developed and executed fixed series
compensation schemes. It has developed thyristor controlled series compensation
scheme, involving thyristor-controlled reactors, popularly known as Flexible AC
Transmission System (FACTS). BHEL has indigenously developed state of the art
controlled shunt reactor for reactive power management of long transmission lines.
With a strong engineering base, the company undertakes turnkey execution of
substations up to 400 KV and has capability to execute 765 KV substations. High
Voltage Direct Current (HVDC) systems have been supplied for economic transmission
of bulk power over long distances.

Transportation
Most of the trains in the Indian Railways, whether electric or diesel powered, are
equipped with BHEL's traction propulsion systems and controls. The systems supplied
are both with conventional DC drives and state of the art AC drives. India's first
16

underground metro at Kolkata runs on drives and controls supplied by BHEL. The
company also manufactures complete rolling stock i.e. electric locomotives up to 5000
HP, diesel electric locomotives from 350 HP to 3100 HP for both mainline and shunting
duty applications. Further BHEL undertakes retrofitting and overhauling of rolling
stock. In the area of urban transportation, BHEL is geared up for turnkey execution of
electric trolley bus systems, light rail systems and metro systems. BHEL is contributing
to the supply of electrics for EMUs for 1500V DC & 25 kV AC to Indian Railways.
Almost all the EMUs in service are with electrics manufactured and supplied by BHEL.
BHEL has also diversified into the area of track maintenance machines for Indian
Railways.

Renewable Energy
In conformity with its concern for the environment, BHEL has been contributing to the
national effort for developing and promoting renewable energy based products on a
sustained basis. Starting from small applications like Solar Powered Street Lighting,
Rural Water Pumping Systems, Railway signaling, Offshore Drilling Platforms, etc.,
BHEL has supplied and commissioned large size stand-alone as well as Grid interactive
Solar Power Plants. With an aim to perform a significant role in National Solar
Missions proposed target of 20,000 MW of grid connected solar power.
BHEL signed an agreement with Abengoa, Spain, a leader in solar projects to provide
EPC solutions in Concentrated Solar Thermal Power (CSP) areas. The company is
working jointly with IOCL and IIT-Rajasthan for development work of product and
systems in the Concentrated Solar Power (CSP) area. A new record has been set by
installing 15MWp Grid Interactive Solar Photo Voltaic (SPV) plants across the country.
17

In the context of Jawaharlal Nehru National Solar Mission, BHEL is executing the
orders

for

Renovation

and

Operation

&

Maintenance

of

SPV

plants

(aggregate2.15MWp) at various Islands of Lakshadweep.

Defense
BHEL manufactures the following for the defense sector:
Integrated platform Management system (IPMS)
Integrated Bridge system
Machinery control room simulator
Training simulator for vehicles, platforms, radars, weapons, missiles and CBT for
all defense and para-military forces
Weapon fire control system, Avionics, Radio communication products, Electronic
warfare systems and early warning system.

Oil & Gas

BHEL is supplying equipment for onshore drilling rigs viz. draw works, rotary-table,
travelling block, swivel, mast & sub structure, mud systems and rig electrics and X'mas
tree valves & well heads up to a rating of 10,000 psi. BHEL has also supplied Casing
Support System, Mudline Suspension System & Block Valves for offshore applications.
It has the capability to supply complete on-shore drilling rigs, super deep drilling rigs,
desert rigs, mobile rig, work-over rigs and sub-sea well heads.

Overseas Operations

18

BHEL has, over the years, established its references in over 70 countries of the world.
These references encompass almost the entire range of BHEL products and services
covering turnkey Power projects (Thermal, Hydro and Gas based), Transmission
Substation projects, Rehabilitation projects for Boilers, Power Stations etc., besides a
wide variety of products, like Transformers, Compressors, Valves and Oil field
equipment,

Electrostatic

Precipitators,

Photo

Voltaic

equipment,

Insulators,

Switchgears, heat exchangers, Castings & Forgings. Some of the major successes
achieved by BHEL have been in:
Gas based power projects in Oman, Saudi Arabia, Iraq, Libya, Bangladesh,
Malaysia, Sri Lanka, China, Kazakhstan;
Thermal power projects in Cyprus, Malta, Egypt, Malaysia, Sudan, Indonesia,
Thailand;
Hydro power plants in New Zealand, Azerbaijan, Bhutan, Nepal, Taiwan,
Malaysia, Afghanistan and Substation Projects & equipment in various countries
of Africa, Europe, South & South East Asia.

Research & Development

The company is taking a number of strategic business initiatives to fuel further growth
in overseas business. This includes firmly establishing itself in target export markets,
positioning of BHEL as a regular EPC Contractor in the global market and, exploring
various opportunities for setting up overseas joint ventures etc.

19

The Corporate R&D Division at Hyderabad leads BHEL's research and development
efforts, ably supported by engineering and R&D groups at the manufacturing divisions.
BHEL's technology policy advocates a judicious mix of indigenous efforts and selective
collaboration in essential areas. The company is thus able to continuously upgrade its
technology and product designs to contemporary standards.
BHEL is one of the few companies worldwide involved in the development of
Integrated Gasification Combined Cycle (IGCC) technology, which would usher in
clean coal technology. It has set up Asia's first 6.2 MW IGCC power plants with an
indigenously designed pressurized fluidized bed gasifier. Presently, there are
development efforts underway to set up a 182 MW IGCC power plant.

BHEL's R&D efforts have produced several new products. To

optimize power plant operations during varying operating
conditions, BHEL has developed an advanced software
package
for
Performance
Analysis,
Diagnostics
and
Optimization of power plants

20

CHAPTER 2
COMPANY PROFILE

21

Kamlesh Kelkar
Admn. Officer (RDP)
(PS)

GM (Mon)
Babu Lal
AGM (Mon)
B. Mishra

Bhopal,

Jhansi,

TBG,

CSU & FP
Balance Scorecard
MCM Co-ordination
Audit Queries
RCSU
Sr. Engineer
Amit Garg

Bhopal, CSU & FP, EMRP RMSG

Engineer
Rudesh Kumar
Jh
ansi, TBG
AGM (Mon)
Yasbir Singh
HPBP, Truchy, SSTP,
BAP, IVP
MCM Co-ordination
ISO Co-ordination
Balance Scorecard
Rajbhasha Kriyanvan
RCSU
Sr. Manager
Rakesh Ranjan
HPBP,
BAP, IVP & HERP
Dy. Manger
Anit Shakya
Engineer
Ayush Gupta

22

AGM (Mon)
R.K. Verma

Manufacturing

Units/

Engineer
Anuj Sain

Service

Divisions

and

Engineer
Mayank Mittal

Product Profile

BHEL has 17 manufacturing plants, 4 power sector regional offices, 8 service centers,
18 regional offices, 4 offices abroad, 1 subsidiary and over 150 project sites spread all
over India and abroad. It offers a wide spectrum of products and services to the core
sector like power generation, transmission, distribution, industry, transportation, oil and
gas, defense, and non-conventional energy system. The brief description and of the
manufacturing units and their product profile is outlined as under

Manufacturing Units
Sno.
1

Unit
HPBP, Trichy

Product

Boiler - structure, pressure parts, fuel oil system

components,

ducting

system,

insulation

&

refractory, coal feeders and piping, HP bypass

2

HEP, Bhopal

valves and other motorized/ manual valves

AC motors & alternators, hydro turbines &
generators up to 250 MW, heat exchangers,
steam

turbine,

TG

(Nuclear,

700

MW),

transformers, switchgear, on load tap changer,

bushings, capacitors, large current rectifiers,
control & relay Panels, traction motors, oil rig
fabrication, diesel generators.
23

HEEP, Hardwar

Large steam turbines, turbo generators (200 MW

& Above), hydro turbines & generators, gas

4
5

CFFP, Hardwar
HPEP, Hyderabad

turbines & generators, condensers.

Steel and cast iron forgings & castings.
Gas turbines, industrial steam turbines,
compressors, turbo generators, heat exchangers,

BAP, Ranipet

pumps, pulverizers, bowl mills & tube mills.

Electro-static precipitators, industrial fans, air
pre-heater,

chimney,

heat

exchangers,

desalination bag filters, wind mill Generators,

7

Transformer Plant, Jhansi

dampers for louvers, gates, Fabric filters.

Power Transformers, Dry Type Transformers,
HVR Transformers, Instrument Transformers,
Traction

EDN, Bangalore

Transformers,

Electric

&

Diesel

locomotives.
Control Systems (Power/ Defense), Sub-station
Automation & Supervisory Control and Data
Acquisition Systems (SCADA), Photo Voltaic
Cells, HVDC Systems/ FACTS/ Custom Power
Controllers, AC/ DC Drive Systems, Energy
Meters, Digital Switching System, Simulators,

9
10
11
12
13
14
15
16

RAX (Rural Automatic Exchange)

Piping centre, Chennai
Power Cycle Piping, SG Piping
SSTP, Trichy
Seamless Tubes, Large Size Forgings
EPD , Bangalore
Porcelain Insulators, Ceramic Products
IP, Jagdishpur
Ceramic Insulators
CSU, Jagdishpur
Fabrication and Stampings
CFP, Rudrapur
SP and IP Bus Ducts and hardware.
IVP, Goindwal
Valve Sub Assemblies
Power Plant Piping unit, Critical piping, Nuclear Secondary Piping and
Thirumayam
24

other piping for non BHEL contracts e.g.

17

BHPV-Bharat Heavy Plate &

Refineries, sugar mills

High Pressure parts and other parts of Boiler.

Vessels Ltd, Visakhapatnam.

Service Divisions
18

Heavy Equipment Repair Plant, Varanasi

Bowl Mill Spares, Steam

Turbine Spares (Governing
Spares,

Parting

plane

etc.),

Hydro

Spares

(Guide

fasteners
Turbine

Vanes, UGB/LGB Pads,

Bearing

and

Housing,

Coolers

Hydrogen

Bearing
etc.),

Coolers

for

Turbo generators, Tools &

Tackles of Steam Turbine,
Spares
Auxiliaries

for

Boiler

like

Coal

Burners, Fuel Piping, ESP,

Air Preheater & RC Feeder
etc., Repair / Re-babbiting
of TG bearing, HP Rotor
machining,

Repair

of

Diaphragm,

Mills

&

Pumps-foundation
19

Electrical Machine Repair Plant, Mumbai.

(Part of Bhopal unit)

Other divisions
25

material.
Motors Repair and BOIs of
Hydro Power plants

ISG-Industrial System Group

Overall system engineering

/Bangalore

of

the

Drives,

Coal

Handling

Plant,

Ash

Handling Plant etc., which

includes

design,

procurement,

supply,

erection & commissioning

of the same.
TBG- Transmission Business Overall system engineering

Group/ New Delhi.

of

the

which

HV

Substations

includes

design,

procurement, supply and

erection & commissioning.
Subsidiary & Joint Ventures companies
1
BHEL-GE

Gas

Turbine

Pvt

Ltd,

Services
Secunderabad.

It

is

Joint

Venture

Company of BHEL & GE,

and is engaged in Services
and Spares supply of Gas

Turbines.
NBPPL-NTPC- BHEL Power It is a

Projects Pvt Ltd, Tirupati

Company

Joint
of

Venture

BHEL

&

NTPC, and is engaged in

design, procurement, supply
and

erection

&

commissioning of Balance
of Plants (BoP). Presently it
is executing BOPs of Gas
based
26

plant

situated

at

Namrup, Monarchak and

OTPC-Palatana and civil/
erection & commissioning
3

BHEL-KEL

27

work of the same.

LT motors

Corporate Office, New Delhi

The role of Corporate Office of BHEL situated at New Delhi is primarily that of laying
corporate objectives, formulating corporate policies, coordinating and synthesizing the action
plans to achieve these objectives. In this process, Corporate Office liaises with the
Government, identifies business opportunities and formulates long term plans for growth of
the company. The key functions at Corporate Office cover Planning & Development,
Engineering & Product Development, Manufacturing Technology, Materials Management,
Monitoring, Quality, IT, HR, Finance and Medical Services which provide policy directions,
plans and budgets for all the business sectors, manufacturing units and service divisions of
BHEL in the respective functions

The Corporate functions report to the respective Directors and Chairman & Managing
Director [CMD]. Structured interactions between Corporate, Business sectors, Units and
Regions are held through Management Committee meetings. This is the apex body
comprising of the CMD, Functional Directors and Heads of Manufacturing Units, Business
Sector and Service Divisions. The Committee holds monthly meetings and reviews, in
addition to operating performance, all major aspects relating to the business scenario, new
business development, Quality Management, Human Resource Management issues, etc. The
strategies are continually tuned to the latest developments in the business environment.

BHELs operations are organized around major Business sectors- Power sector, Industry
sector & International Operations, which have primary marketing responsibility for major
products & systems. Power sector regions install the supplies from manufacturing units &
related accessories. All the units of BHEL act in an integrated manner to deliver the products
28

& services for timely commissioning of power plants.

Major achievements of BHEL: Has installed equipment for over 1, 00,000 MW of power generation -- for Utilities,
Captive and Industrial users.
Govt. of India has conferred Maharatna status in 2013.
Supplied over 2,25,000 MVA transformer capacity and other equipment operating in
Transmission & Distribution network up to 400 kV (AC & DC).
Supplied over 25,000 Motors with Drive Control System to Power projects,
Petrochemicals, Refineries, Steel, Aluminum, Fertilizer, Cement plants, etc.
Has footprints in 71 countries.
Supplied Traction electrics and AC/DC locos to power over 12,000 km Railway network.
Has supplied over one million Valves to Power Plants and other Industries.
Has over 150 Project construction sites in India & Abroad.

The company has grown in stature over the years with continued inflow of orders,
manufacturing prowess, continued thrust on technology leading to a strong presence in
domestic and international markets as a major supplier of power plant equipments besides
establishing substantial inroads in select segment of products in Industrial sector and
Railways.
In the thermal generation, BHEL supplies steam turbines, generators, boilers and matching
auxiliaries up to 800 MW ratings which include sets of 660/700/800 MW based on
29

supercritical technology. BHEL has capabilities to offer sets upto 1000 MW unit rating.

BHEL has been maintaining its reputation for high quality and reliable equipment. BHEL,
where Quality Systems as per ISO-9000 have taken deep roots, has made significant
achievements in Business Excellence by securing Commendation for Significant
Achievements in TQM for three of its manufacturing units and one power sector-region
during 2011-12.
In recent years, BHEL has optimally invested for manufacturing capacity expansion. The
country has adopted capacity and capability enhancement strategy and accordingly BHEL has
achieved capability to deliver 20000 MW power generating equipment per annum.
To maintain a balanced growth, BHEL intends to increase its focus on transportation,
transmission, nuclear power and renewable energy segments for business portfolio
diversification.

Strategic Plan 2012-17

BHEL has formulated its Strategic Plan 2012-17. The plan attempts to steer the company
towards becoming a global engineering enterprise. Key drivers of our success are expanding
the offerings in Power sector by building EPC Capability, focus on Industry businesses,
expansion of spares and services and adoption of collaborative approach.
Power sector will continue to remain major contributor in the companys top line with
transportation and transmission emerging as next big business verticals. Strategies are in
place to strengthen companys presence in Nuclear, Renewable and Water segments.

30

Financial Performance
During the financial year 2011-12, the Company has achieved a turnover of Rs 49510 crore
as against Rs 43337 crore (Rs 41299 crore excluding one-time impact of change in policy
related to provision for warranty obligation for earlier years) in the year 2010-11 recording a
growth of 14.2% (19.9% excluding one-time impact) over 2010-11.
Profit after Tax for the year 2011-12 stood at Rs 7040 crore as compared to the 2010-11
figures of Rs 6011 crore (Rs 5665 crore excluding one-time impact).
During the year 2011-12, the company received orders worth Rs 22096 crore. The total order
book outstanding as on 31.12.12 available for execution in 2012-13 and beyond stood at Rs
113700 crore down from Rs 135000 crore as on 31.03.12. Order inflow has been impacted
due to structural issues related to coal linkages, environment/forest clearances, land
acquisition and gas availability. Industrial orders also remain weak. Things are expected to
look up only from FY16. Order book will improve only when the sector will overcome
hurdles like fuel and lack of off take arrangements which is likely by 2015-16.

The Departmental Analysis

Human Resource Management

The module for human resource management taught the lessons about knowing yourself,
managing yourself, emotional Quotient and its importance in success motivating yourself,
RajabhashaNiti and its role in life. The module also familiarized us with HR policies of the
company.
31

Organizational Effectiveness
In this module, I learnt how to be effective and work effectively in an organization. The
Module covered lectures on Communication skills- Concepts and Models, the art of public
speaking and body language, how to develop, build & continue interpersonal relations,
personality preferences & personal styles, concepts like FIRO-B (Fundamental Interpersonal
Relations Orientation), the interpersonal needs etc. There were some exercises to touch these
practical aspects in life. These exercises really helped in some way to understand ourselves in
a better way.

Finance Management
This module has provided an overview of various basic fundamentals of finance and practices
that are followed in BHEL. These included Audits & Auditing practices, the concepts of
Indirect Taxation in BHEL consisting of Custom duty, Import duty, Export duty, Sales tax,
VAT etc., budgeting budgetary control, types of budgets, income tax (direct tax), accounting
policies and accounting methods for revenue recognition, Invoicing and debtors management.
Other aspects covered were financial statements such as, cash flow statements, balance
sheets, operating results etc. and ratio analysis of financial ratios like profitability ratio,
liquidity ratio, leverage ratio, turnover ratio & valuation ratio etc.

32

Industrial Health/Safety & Environment

With the exemplification about health, safety & environment I could assert the importance of
these in an industrys success. BHELs contributions towards Corporate Social Responsibility
till date include adoption of villages, free medical camps/charitable dispensaries, schools for
the underprivileged and handicapped children, ban on child labour, disaster/natural calamity
aid, Employment for handicapped, Widow resettlement, Employment for Ex-serviceman,
irrigation using treated sewage, pollution checking camps, plantation of millions of trees,
energy saving and conservation of natural resources through environmental management.

Quality, TQM & Business process RE-Engineering

This module introduced the concepts of quality circle, Total Quality Management & Business
Process Re-engineering. The lectures started with the history of quality circle, its
development and its adoption by BHEL in 1980, the philosophy of quality circle and the need
of quality circle. The lecture included the methodology adopted, the evaluation & rewarding,
the weight-age scheme, how the scoring is done and the normalization. The tools and
techniques for quality circle were illustrated i.e. the seven basic quality tools, the steps in
problem solving, the PDCA (Plan-Do-Check-Act) cycle & the process improvement tools.

Work Study & Productivity

In this module, another method to improve productivity was taught. The work study includes
Method study and work measurement which are the techniques to increase productivity. The
module showed the steps to be followed for method study and work measurement, the charts
used for recording the data, time study and work sampling.

33

Commercial Management
Commercial management keeps track of the activities related to the tenders like preparation
of the tenders & follow-ups, interaction for development of new design and new initiative,
presentation of new design & initiative directly. It is a kind of link between the business
sector and the other departments like engineering, quality etc. which is to act as an interface
between the customer and company and also the various activities involved in it like
technical scrutiny of tenders, finalization of offer price, submission of bid, negotiating offer
price with the customer, generation of purchase order and its conversion into work order to
facilitate actual manufacturing inside the factory.

Production Management
These are the modern concepts that help in improving the effectiveness and efficiency of
production and the processes. The concepts like critical path method (CPM) and Program
Evaluation & Review Technique (PERT), the process capability measures, measurement
system analysis (MSA), 5S technique, the production planning & scheduling, the value
engineering concepts etc were some of the techniques used today to enhance productivity and
manage it effectively.
This module focused on how the work order is actually executed inside the factory, beginning
from receipt of materials to circulation of manufacturing drawing on the shop floor. The
module also explained in detail about the work order code, its basis and utility. The module
also covered activities related to production planning such as preparation of production
budget, material budget, follow up for Engineering information, tracking the movement of
material, scheduling of jobs on different machines etc.

Material Management
34

Materials are essential inputs to production management that involves arranging right items
of right quantity/ quality at right time and right price for production. It was 3 day module that
highlighted on the management of supplies of raw material, components, sub-assembly,
assemblies, system eqpts, BOI &BOPs supplied from the vendors in India and abroad, the
issues regarding the amount of inventory to be kept, the storage of the raw materials, the
logistics etc. The modern concepts of controlling the amount of inventory like JIT (Just in
Time), WIP (Work in Progress), EOQ (Economic Order Quantity) etc gave an idea about the
importance of Inventory control.
This module covered in detail, the process of procurement of raw material in the company.
Various steps involved in the process like issue of enquiry, scrutiny of offers and placement
of purchase order. Topics such as types of tendering, vendor development, inventory
management, storage of raw materials, logistics etc were also covered.

Planning and Development

It is very important for any organization to run on a validated strategy otherwise it is bound to
fail. The complete cycle involves first of all Formulation of strategy, then Alignment or
Deployment (by the help of Balanced Scorecard) followed by performance measurement and
then finally Reward. For a strategy focused organization it becomes easier to achieve its
targets, the strategy deployment/alignment is made easy by a technique known as Balanced
Scorecard (BSC). The module was about this technique that illustrated the role of strategic
management in an organization. It also included the history of BSC concept, the different
perspectives of BSC, advantages of BSC etc.

Quality Objectives and Key processes

35

The objectives of Corporate Monitoring (CM) are documented every year in the
Balanced Scorcard (BSC) cascaded from the Corporation BSC and department level
initiatives. The BSC is prepared in the beginning of every year and forms part of
annual planning exercise. The BSC is also reviewed every quarter by Head (CM) and
the final report of performance of achievement is complied at the end of the year and
sent to the Corporate Committee for evaluation.
The key activities, inputs, process, outputs, measures and control are as follows :
Key Activities
Formulation of
Revenue
Budget for the
year

Input

Process

Business
projections
from Sector
& units
Inputs based
on detailed
discussion for
identification
critical issues
during

visit

to Units with
budget teams
MIRs from
Units

Output

Study

of Issues

to

of Directors

to

units,

enable

manufacturing

decisions

capacities

yearly targets

team in budget

Submission
of

discussions
Issue

of

concerns

for

ntation

Directors

for

R.E./B.E. in

agenda/prese

facililitating

of

MCM

finalization

of

Board note

R.E./BE
presentation
36

for )

loading/setting

corporate

in

guidelines
(Confidential

of effective shop

units
Participation
with

for Budget

R.E./B.E

business
projections

Control

and

MCW

Financial T.O.

T.O. MIRs
T.O.

Performance

Projections
MIRs
on

Physical

&

Reports/MCM
Agenda

rolling basis
Inputs during
visits to Unit
Anticipated
orders MIRS
Inputs from
Business
Sectors/Units.

Board

Note.
Consolidation

of Monthly T.O.
Report
finance
and
Three month
physical
T.O.
Rolling plan
rolling projections,
for
anticipated order T.O.
book status as per
projections
Report on
MCM Agenda
status of firm
Study
and
and
analysis
of
anticipated
turnover
orders
performance
Submission/
based on yearly/
uploading of
monthly targets,
MCM
order

book,

projections etc.
Finalization of
MCM

agenda

with issues of
concern.
Consolidation of
Quarterly
performance
Reports

based

on unit inputs.
Balanced

Balance

scorecard

Score

37

Based on inputs
Card

from functions

agenda
Board Note

Revenue
Budget
(Confidential
)

formulation and

from

assessment/

Units/Region

performance
calculations for

company Level

s
Business
Sectors
Inputs from

plant

Corporate
functions and
business

performance

sectors
Inputs

on

BSc is finalized

Unit/Sector
Level BScs are
finalized/assesse
d

based

on
Stretegy map

interactions
between sectors,
units/
corporate

Score Card

Plant

functions in line

Performance

with

from units/
corporate
sectors

Company

for

Corporate HT
(Confidential)
of Inputs

annual
administrative
report

of

company
DHI, GOI.

the
to

study/

and

functions/sectors
per

analysis
of inputs

and

requirements of

preparation

of

DHI, Govt. of

report

India

guidelines
approval

as

per
of
for
of

)
MOU
(Confidential
)
Revenue

with

Budget

alternatives

(Confidential

top )

mgmt.
Submission

from Consolidation

DHI,
38

for approval

for

corporate
as

plants,
assessment

BSC.
of Directors
PP calculations
PP
are done as per
calculations
scheme,
with
alternatives

Submission

(Confidential

Balanced

As per

of Annual
requirement
Administrat
of Ministry.
ive
Report of
the
company to
DHI, Govt.

guidelines.
Organizing Mid Input
Term Review of
operations

by

CMD/Directors

Directors/CMD.
on Finalisation

performance
from units
Inputs
from
corporate
functions

on

performance

Mid
schedule

of Half Yearly Revenue

Term
with

Directors/CMD
Communication

report with Budget

issues

on

performance
to

to all EDs/HODs

CMD/Direct

regarding agend

ors
Minutes of

and schedule.
Issues
for
Directors/
CMD

on

Meetings
after
consolidatio

performance and

areas

receipt from

of

concerns.
Issue of Minutes
based

on

discussions

in

Mid Term.

39

of India.

of

units

data

(Confidential
)

Introduction
I joined Corporate Monitoring Group at Corporate Office, New Delhi on 4th
June 2014. Throughout the course of the training, I have received muchappreciated guidance, assistance and encouragement from my reporting officers
Shri BabuLal, Shri Yasbir Singh.

Roles and Responsibilities of Corporate Monitoring

Department
1) Provides intelligent decision support service to top management in formulating and
achieving budgeted performance targets.
2) Monitoring performance of operations of units/regions

40

3) Monitor the performance of operations of Units/Regions, identify critical issues &

generate early warning signals for top management for timely course correction.
4) Generate early warning signals for top management after assimilating information
from multiple functions on issues of concern
Monitoring the performance of different manufacturing units is assigned to specific
individuals.

CHAPTER 3
RESEARCH METHODOLOGY

41

RESEARCH METHODOLOGY
NEED OF THE STUDY

To comprehend the scenario of change, it is to be realized in the first place that the
environmental contexts in which organizations exist are never static. Today,
liberalization of the economy and coming up of many players has induced an
unprecedented scale of dynamism in the economic environment of the country. In this
fast changing environment, organizations as well as individuals are pro-active to join in
the game and then strive to extend their own spheres of influence for survival and
sustained growth.
To meet the challenges of the environment and extend the sphere of influence, for an
organization it is not merely a question of its commercial orientation, though it is
important. For an enterprise it has to be a quantum leap in transformation from what it
is today to a more responsive and innovative organization of tomorrow. And that
ensures the extension of its sphere of influence with a competitive strength in the
market place.
OBJECTIVE OF THE STUDY

To understand the current scenario of Power Sector

To analyze the current status of power generation equipment market

To analyze the decision making factors of customers

To identify factors for success of Chinese equipment manufacturers

To ascertain potential market and competition

Find out how Chinese are able to achieve cost leadership

42

Meaning of research
Research has been defined by various authors in different ways. It always begins with a
question or a problem. Its purpose is to find answer to question through the application
of systematic method. Thus research is the systematic approach purposeful
investigation.
This needs formulating a hypothesis, collection of data and relevant variables,
analyzing and interpreting the result and reaching conclusion either in the form of a
solution or certain generalizations.
So, finally a Research is an academic activity and systematized efforts to gain new
knowledge.
Methodology
The term methodology is defined as a specific way of performing an operation that
implies precise development at the end of each stage.
Research Methodology
Research methodology defines what the activity of research is, how to proceed, how to
measure progress, and what constitutes success.
There are various tools for conducting a research. It can be surveys, hypothesis,
questionnaire, etc. The method used here in the project for conducting the research is
Personal Observation and Content Analysis

Research Design:
43

The study is basically Descriptive in nature

Descriptive Research is used to describe characteristics of a population or a
phenomenon being studied. It does not answer questions regarding how/when/why the
phenomenon occurred rather it addresses the what question.
Source of data:
The data was collected from Primary and Secondary sources.
The primary data are the first hand information collected, compiled and published by
organization for some purpose. They are most original data in character and have not
undergone any sort of statistical treatment.
Example: Population census reports are primary data because these are collected,
complied and published by the population census organization
Data collection tools/instruments
Primary Data Collection:
Primary data was collected through personal observation in the Power sector, marketing
part. This method of collection through personal observation is most extensively
employed in various economics and business surveys. First hand information was
collected by personally visiting different sectors.
This method of data collection was chosen because:

General Conclusions are most flexible

Observer has adequate time to think over the department activities.

44

Secondary Data Collection:

Various books, journals and internet sites were searched in order to find the useful
information for the completion of this project.
Data Analysis:
The data collected has been analyzed theoretically and graphically through charts

45

CHAPTER 4
BALANCE SCORE CARD
Analysis

46

BALANCE SCORE CARD

The monthly reports are generated based on the following formats:
Turnover performance
Reason of shortfall
Physical Turnover performance
The objectives of Corporate Monitoring (CM) are documented every year in the Balanced
Scorecard (BSC) cascaded from the Corporation BSC and department level initiatives. The
BSC is prepared in the beginning of every year and forms part of annual planning exercise.
The BSC is also reviewed every quarter by Head (CM) and the final report of performance of
achievement is compiled at the end of the year and sent to the Corporate Committee for
evaluation.

Balanced Scorecard (BSC) is a tool employed by BHEL to orient the efforts of individual
employees towards achieving Company level targets to meet strategic objectives. This is done
by setting targets in the form of Key Performance Indices (KPIs) in Company level BSC
under four different perspectives which are a) Financial perspective, b) Customer perspective,
c) Internal Process perspective and d) Learning and Growth perspective.
The Company level targets are then cascaded to formulate BSCs of Manufacturing Units,
Corp. Functions and Regions. Each Unit level BSC is further cascaded to formulate HoD /
Section level BSC which in turn is further cascaded as KRAs in e-maps of individual
executives.
This way alignment of employee level targets to those of Company as a whole is

47

Balanced Scorecard (BSC)

Every year as per the Strategic Road map of BHEL, the activities associated with
Balance Score Card i.e. Assessment and Formulation of BSC are carried out. The work
flow associated with it is as follows.
Formulation of BSC
Inputs from Strategic Plan
Roadmap

Inputs from Corporate

functions

Preparation of Company Level BSC

CMC Starts CLBSC cycle

CFCs provide CLBS inputs in their respective areas and

mark completion of input

CMC mark completion of input for CLBSC cycle

CMC reviews, accepts/not accepts edits and comments on

input from CFCs and mark completion of 1st draft of CLBSC

UCs comment on their respective projects in 1st draft of

CLBSC and mark completion of comments
CMC mark completion of comments by all executing
agencies
48

Inputs from MOU

CFCs review comments and do corrections in KPls in

CLBSC and mark completion of review of CLBSC.

Additional
Guidelines

CMC discusses with Top Management and do corrections

in CLBS accordingly and marks finalization of CLBSC

Preparation of Unit Level BSC for MUs

Preparation of Unit Level BSC for

Corporate Functions

CMC marks start of ULBSC cycle thereby

cascading CLBSC and additional KPIs to
respective ULBSCs.

CFCs edit cascaded KPIs, provided new KPIs for

their respective ULBSCs and mark completion of
1st draft of their respective ULBSC

UCs edit cascaded KPIs, provide new KPIs

for their respective ULBSCs and mark
completion of 1st draft of their respective
ULBSC.

CLCC reviews their respective projects in

all the ULBSCs draft and provide
comments

CFCs revise KPIs as per comments

CFCs review their respective projects in all provided and mark completion of 2nd draft
the ULBSCs draft and provide comments
of ULBSC
UCs revise KPIs as per comments provided
and mark completion of 2nd draft of
ULBSC.
CMC mark completion of 2nd draft of all of
the ULBSCs
49

CLCC marks completion of 2nd draft of all

of the ULBSCs
CLCC reviews 2nd draft, make correction
and mark finalization of ULBSCs

Data and Document Control:

The monthly reports are generated based on the following formats:

Financial Turnover performance

Reason of shortfall

Physical Turnover performance

Status of projects Budgeted/completed

Turnover projection

Unit wise issue

50

E-MAP

51

Evaluation of BSC
52

CMC marks start of BSCs evaluation cycle

Evaluation of Company Level BSCs

CFCs provide evaluation of projects with primary responsibility and marks completion
of evaluation.
Based on Committee recommendations, CMC evaluate evaluated CLBSC and mark
completion of evaluation of CLBSC.

Evaluation of Unit Level BSCs

UCs provides self-evaluation of their ULBSC and mark completion of self-evaluation.
CFCs evaluate their respective projects in UlBSC and mark completion of Corporate
Teams evaluation.
CMC mark completion of Corporate Teams evaluation of ULBSC.
Based on High Level Committee recommendations, CMC finalize the evaluation of
ULBSC and mark completion of evaluation of ULBSC.

Evaluation of Corporate Function BSCs

CFCs provide self-evaluation of their BSCs and mark completion of self-evaluation.
Corporate Team (CLCC) evaluate Corporate Functions BSC and mark completion of
Corporate Teams evaluation.
Based on High Level Committee recommendations, CLCC finalize the evaluated
Corporate Functions BSCs and mark completion of evaluation.

Completion of evaluation of All Unit Level BSCs

CMS mark completion of evaluation of all ULBSCs

Completion of evaluation of All BSCs

CMC mark completion of evaluation of all ULBSCs
Status of projects Budgeted/completed
Turnover projection
Unit wise issue
53

PROJECT SITE/ SISTER UNIT LEARNING

In this part of training module, trainees are supposed to acknowledge themselves about the
general perception of BHEL among customers and customers expectations from BHEL. It
provides a platform to trainees to get the basic understanding of customers needs and also
help in searching new areas to expand BHEL business.
It also provides customers feedback about BHEL products quality and services that can
make an immense help to BHEL in improving the various aspects like manufacturing
planning and delivery on site with the objectives of:
To understand customers needs, expectations and their business.
To gain knowledge about BHEL products, services and areas needing improvements.
To find BHELs areas of improvement and new opportunities to expand BHELs business.

54

CHAPTER 5
BUSINESS & MARKETING

55

BUSINESS POTENTIAL
BUSINESS MISSION
To maintain a leading position as suppliers of quality equipment, systems and services
i n t h e f i e l d o f c o n v e r s i o n o f e n e rgy, f o r a p p l i c a t i o n i n t h e a r e a s o f
electric

p o w e r transportation,

oil and

gas exploration

and

industries.

Utilize company's capabilities and resources to expand business into allied areas and other
priority sectors of the economy like defence, telecommunications and electronics.

BUSINESS OBJECTIVES: GROWTH

To e n s u r e a s t e a d y gr o w t h b y e n h a n c i n g t h e c o mp e t i t i v e e d g e o f
B H E L d e f e n s e , telecommunication and electronics in existing business, new areas
and international operations so as to fulfill national expectations from BHEL.

PROFITABILITY: To provide a reasonable and adequate return on capital employed, primarily through
improvements in operational efficiency, capacity utilization productivity and generate
adequate internal resources to finance the company's growth

56

CUSTOMER FOCUS
To build a high degree of customer confidence by providing increased value
for money through international standards of product quality, performance
and superior services

PEOPLE- ORIENTATION
To enable each employee to achieve his potential, improve his capabilities, perceive his role and
responsibilities,participate and contribute positively to the growth and
success of the company and invest in human resources continuously
TECHNOLOGY
A c h i e v e t e c h n o l o g i c a l e x c e l l e n c e i n o p e r a t i o n s by d e v e l o p m e n t
o f i n d i g e n o u s technologies and efficient absorption and adaptations of imported
technologies to suit business need and priorities and provide the competitive advantage to the
company.
IMAGE
To fulfill the expectations which stakeholders like government as owner,
employees,customers and the country at large have from BHEL

57

Human Resource Development Institute

BHEL has envisioned becoming "A World Class Engineering Enterprise committed to enhancing
stakeholder value". Force behind realization of this vision and the source of our competitive
advantage is the energy and ideas of our 44,000 strong highly skilled and motivated people. The
Human Resource Development Institute situated in NOIDA, a corner-stone of BHEL learning
infrastructure, along with Advanced Technical education Center (ATEC) in Hyderabad and the
Human Resource Development Center at the manufacturing Units, through various organizational
developmental efforts ensure that the prime resource of the organization the Human Capital is
Always in a state of Readiness, to meet the dynamic challenges posed by a fast changing
environment. It is their constant endeavor to take the HRD activities to the strategic level of
becoming active partner to the (organizational) pursuits of achieving the organizational goals

SWOT ANALYSIS
STRENGTH
1. Public sector company
2. Sound engineering base and ability to assimilate
3. Relatively stable industrial relationship
4. Ability to set up power plants on turnkey basis, complete know- how for manufacture of
entire equipment is available with the company
5. Ability to manufacture or procure to supply spares
6. Fully equipped to take capital maintenance and servicing of the power plants.
7. Largest source of domestic business leading to major presence and influence in the market
8. Ability to successfully overhaul and renovate power stations equipment of different
international companies
58

WEAKNESS
1. Difficulty in keeping up the commitments on the product delivery and desired sequence of
supplies
2. Larger delivery cycles in comparison with international suppliers of similar equipment
3. Inability to provide suppliers credit, soft loans and financing of power projects
4. Due to poor financial position of state electricity boards, which are the major customers of
BHEL in India, liquidity position of BHEL is not satisfactory
5. Displacement of social objectives by political objectives, which may lead to
redundant costs and also rising costs

OPPORTUNITIES
1. Demand for power and hence plant equipment is expected to grow
2. Private sector power plants to offer expanded market as utilities suffers resource crunch
3. Ageing power plants would give rise to more spares and services business
4. Easy processing of joint ventures/ collaboration/import/ acquisition of new technology
THREATS
1. Increased competition both national and international.
2. Multilateral agencies reluctant to lend to power sector because of poor financial
management of S.E.Bs

59

MACRO MODEL:

60

Twin Problem faced by BHEL

BHEL is currently facing two problems. The first problem is competition from Chinese
power equipment manufacturers. The Chinese have cost leadership and are able to
provide equipment to power developer at low price.
The second problem is that till recently BHELs capacity was lesser than the capacity
addition targeted by the government in 11th five year plan which resulted in BHEL Ltd
losing potential orders to its competitors.
The second problem is being solved by capacity augmentation.

How to
solve the
first
problem?
To solve the first problem it is required that a proper analysis should be performed.
Factors responsible for cost leadership of Chinese should be studied.

61

Need of the study

A number of players have entered the power generation equipment manufacturing
industry. They have mentioned the table 5.1 below

Suppliers

Nature

Type

BHEL

Indian PSU

Engineering Procurement Construction

Bharat Forge + Alstom

Indian & French JV

Turbine Generator Package

JSW + Toshiba

Indian & Japanese JV

Turbine Generator Package

BGR + Hitachi

Indian & Japanese JV

Engineering Procurement Construction

Cethar + Relay

Steam Generation Package

Doosan

South Korea

EPC : manufacturing base in Chennai

Thermax + Babcock

Indian

Steam Generation

Ansaldo

Italian

EPC

L&T + Mitsubishi

Indian & Japanese JV

EPC : manufacturing base in Hazira

Shanghai Electric

Chinese

EPC

Dongfang

Chinese

EPC

BHEL had a monopoly over the market till recently but now a lot of private players
have crowded the market.
An analysis of power equipment manufacturer performance on several parameters is
given below in table 5.2

62

ANSALDO

DOOSAN

BGR HITACHI

CETHAR

THERMAX

CHINESE

ALSTOM

TOSHIBA

L&T

Indigenization

Newer Rating

EPC

BHEL

Parameter

capability
Equipment
Financing

Sets
Manufacturer
as Developer
Knowledge of
Indian
Conditions

1 Very Low
2 Low
3 Medium
4 High
5 Very High

63

We can see from the table above that BHEL has high capability and can meet the
demand and specification of its customers. BHEL was a heavy weight in the past for
this reason they provide full customer satisfaction.
The most important information for us which is conveyed by the table is how the
Chinese are so successful in bagging orders.
The Chinese score low in knowledge of Indian conditions, medium in EPC capability
and very low in Indigenization, newer rating sets and they have no experience as a
power plant developer. Yet the Chinese have stormed the industry and the reason for
that is Equipment Financing.
The Chinese bundle their equipment with easy financing. Financing these days is a
problem as several banks are refusing to give credit to the companies because they have
already exceeded their ceiling limit and financial closure problem.
The Chinese see this as an opportunity and several Chinese leading institutions offer
credit to power plant developers on the condition that they will buy equipment from
Chinese power generation equipment manufacturers.
Despite Scoring low we can see that Chinese are the most competitive in many
parameters.

64

Chart 5.2

Capacity addition targeted and achieved in five year plans in Chart 5.3

65

From the charts above we can see that power demand in India will grow to 1207
GW by 2032. India is a developing country and its power demands need to be fulfilled
in order to achieve the 9% growth rate target set by the government. It is visible that the
capacity addition targets that the planning commission proposed were not met in 10th
and 11th five year plan. In the 12th plan we need to achieve the capacity addition targets
and the remaining unachieved capacity addition of previous five year plan.
This means that there is tremendous potential in this sector and all the target numbers
are potential orders for power generation equipment manufacturers.
To be successful, BHEL needs to find out and analyze the reasons behind the success of
Chinese in India and take required actions
66

67

Details of Work Carried Out

Market Share: Calculation and Analysis
Thermal & Hydro Projects Commissioned: Given in percentage in pie charts

68

69

Chart 5.4

70

Equipment supplied in projects Commissioned

Capacity Commissioned (MW)

Suppliers 2008-09

2009-10

2010-11

2011-12

BHEL

1710

4095

6333

8458.2

Chinese

339

2934

5371

8673

Others

1404.7

2116

236.5

2328.5

Total

3453.7

9145

13820

19459.7

Table 5.3

71

The cumulative capacity of Thermal and Hydro projects commissioned during

the period 2008-12 increased at a CAGR of 54.07%

BHELs numbers as far as total capacity supplied increased but lower in

proportion to the overall increase in capacity

The total capacity of equipments supplied by the Chinese increased at a CAGR of

124.9%

Others were the worst hit

Who are switching?

BHEL continued to be the preferred supplier of central and state companies.
BHEL lost a number of projects under independent power producers (Private
Players).
Analysis of projects commissioned by Independent Power Producers

Table 5.4 Capacity of Equipment

Supplied (Thermal)

Supplier 2008s
09

200910

201011

2011-12

BHEL

250

1050

Chinese 0

2295

4693

8534

Others

382.5

1742

236.5

1286.5

Total

882.5

4287

4929.

10870.5

72

500

5
Source : Ministry of Power and Central Electrical Authority

73

Chart 5.5 : Equipment supplied for

projects commissioned by Independent
Power Producers during 2008-12

74

Table 5.5
Supplier

% of capacity of equipment
supplied (Thermal)
2008-09 2009-10 2010-11 2011-12

BHEL

56.6572 5.83158 0
2
4

9.65916
9

Chinese

Others

43.3427 40.6344 4.79764 11.8347

8
8
7
8

53.5339 95.2023 78.5060

4
4
5

Source : Ministry of Power and Central Electrical Authority

As compared to previous year the total capacity commissioned by private sector

increase by 385.78%, 14.98%, and 54.65% in 2009-10,2010-11 and 2011-12
respectively

In 2009-10 the total capacity commissioned under private sector increased by

385.78% but BHEL s contribution in that decreased to a mere 5.83% from
56.66% in the previous year

Share of Chinese companies increased from 0% to 53.53%,95.20% and 78.51%

in 2009-10, 2010-11 and 2011-12 respectively

75

Why are private companies switching?

Lower price: India suffers from infrastructure deficit. In order to achieve the
promised growth rate of economy it is necessary to develop sufficient power
generation capacity. Cost leadership of Chinese equipment manufacturers makes
them the preferred supplier for upcoming projects.

Shorter delivery period: Till recently BHEL was facing capacity issues. Its
capacity was lower than the demand which resulted in independent
companies shifting towards the Chinese to meet their demand.

Easy credit: With the borrowings exceeding the limit, some of the banks have
stopped giving loans to power generation companies. The Chinese look at this as
an opportunity. The Chinese give loans to generation companies on the terms that
they must purchase equipment from Chinese manufacturers.

How are the Chinese achieving cost leadership?

Rating of various factors which create an environment for growth of manufacturing
industries by Deloitte
Highly Competitive 5
Relatively Strong 4
General Competitive -3
76

Relatively Poor 2
Poor 1
Regional

Countries F.C. Wages

Differences

Scale &

SCM Infrastructure Quality

No.
of
&
Qualified
Availability senior
of labor
technical
talents

(labors)

China

3.5

3.2

Japan

3.1

3.3

Technology S.Korea

3.4

IT industry

India

Emerging
Industries

3.8

3.7

3.2

3.3

3.9

4.3

4.3

4.3

3.3

3.8

3.9

3.8

3.9

4.2

4.1

2.9

2.7

2.8

3.3

Thailand

3.8

4.3

3.5

3.5

3.8

2.8

Vietnam

3.7

4.1

3.2

2.7

2.8

2.7

Indonesia

3.8

3.8

3.0

3.2

3.0

3.0

Efficiency
Brand &

dominance

Table 5.6
It is evident the table above that the Chinese have an environment which is more
conducive for growth of manufacturing industry as compared to other Asian countries.
The Chinese are achieving cost leadership due to several factors. Some of the factors
mentioned below are further analysed

Labour

Trade policies

77

Credit Availabililty

Raw Materials

Infrastructure Performance
There are factors also but we will be analyzing only the above mentioned main
factors in this report.

Comparisons of factors between Indian and China

Labour:
We analyze labor as contributor in achieving cost leadership by comparing average
labor compensation (ALC), average productivity (ALP), and unit labor cost (ULC) in
India and China. ALC is defined as the ratio of nominal labor compensation (LC) to
total number of employees , while ALP is obtained as a ratio of gross value added
(GVA) to number of employees. Finally, ULC is the ratio of ALC to ALP or simply the
ratio of nominal labor compensation to gross value added. The comparisons can be
made at between two pints in time or on an annual basis. In this context, it is important
to note that while labor compensation is expressed in current prices, the time series for
output (gross value added) is deflated with output deflators. Thus, in the calculation of
ULC, only the denominator (ALP) is expressed in real terms, while the numerator
(ALC) is in nominal terms. ULC is supposed to measure the nominal cost per unit of
real output. Hence the unit labor measure represents the current cost of labor per
quantity unit of output produced.

78

It is also important to recognize that Chinas productivity advantage relative to India is

only very recent. India clearly had higher productivity levels for most of the period
(also in the before), indicating high levels of capital intensity in India as compared to
China.
The value added per employee in Machinery and equipment manufacturing in China is
40.2 units where as in India it is 15.3units.
Therefore value added by a Chinese employee is 38.052% more.
Clearly from the above analysis we can conclude that labor in china in not only cheap
but highly productive as well, the value addition by the Chinese is 38.05% more than
that by an Indian employee.
Trade Policies:
During 1950s India and China chose substitution strategy for industrial development.
This strategy was being used by many developing countries to insulate themselves from
the world economy and industrialization under the aegis of state enterprises. This was
followed by paradigm shift from import substitution to outward orientation. China
started liberalization in a major way in 978. During 980s all India focused on was
primarily on internal deregulation and not trade liberalization. Changes in Indias trade
policy regime were in early years of 990s which to was in response to balance of
payment crisis.
The rationale behind this move was that greater competition would force production
units to improve productivity which will drive overall economic growth. The
conventional wisdom says that such a move would lead to reallocation of productive
79

resources from import competing industries to those industries where the country has
comparative advantages, which means that export and import will grow faster but this
will come at the cost of some of the domestic industries going out of business.
Chinas contribution to the world trade increased steadily from 1%to 6% from 1980 to
2004 whereas Indias contribution only increased from 0.4% to 0.8%.
Trade Policy Reforms
Prior to reforms India and China had a policy that promoted national self- sufficiency
and non- reliance on imports or economic aid accompanied by trade and exchange
control mechanism to delink domestic prices from accompanied by trade and exchange
control mechanism to delink domestic prices from world relative prices. India had a
large private sector market which was regulated by the state control on the other hand
China had a non- market economy. Both the countries created a bias against export by
overvaluing exchange rate. In China Foreign Trade Corporations had a monopoly over
foreign trade activities, but if you consider the case of India, due to involvement of
private sector an elaborate system of exchange control and allocation was instituted to
ensure that the foreign exchange earned by exporters was used to import only to ensure
that the foreign exchange earned by exporters was used to import only commodities that
conformed to the priority set in the five year plain.
Credit Availability
Power equipment manufacturers and power plant developers both have credit
requirements. The Power equipment manufacturers need credit for manufacturing
equipment and on the other hand power plant developers require it for purchasing
equipment from the manufacturers.
Credit Availability is seen in two parts :
80

Credit for manufacturers and Credit for developers

Raw Material
Steel is the main raw material for the power equipment manufacturing industry. In this
section we will concentrate mainly on steel as raw material and we will try to see if it

plays a role in achieving cost leadership for the Chinese or not and if yes then how?
Current Steel Production in India is 81.2 million metric tonnes. India was producing
only 1 million 81one at the time of its independence in 1947. By 1991 it grew to around
14 million tones. Thereafter, it doubled in the next ten years and then it is doubling
81

again, may be over a slightly longer span. Steel production in India is accepted to reach
275 million tonnes by 2020 which could make it the second largest steel maker.
Chinas steel production stands at 779 million tonnes which is 10 times more than India.
China is facing over capacity situation and Chinas output is 35% more than supply
which has forced price correction which has a positive implication for Chinese power
equipment manufacturer.
Infrastructure Performance
Industrial productivity in every country is closely related to infrastructure ,including
highways, railways, ports, aviation hubs, power facilities, water supply facilities and
telecommunication network.
Chinese infrastructure is characterized by:
Sufficient power supply
Highly developed highway and railway network
Worlds largest port Cargo volume
Extensive coverage of communication networks
Social System supporting the effective operations of the infrastructure
Therefore manufacturing enterprises in China have been provided with favorable
fundamental involvement for investment.

82

Chapter 6
Special Findings & Loop holes

83

BHEL bags just 21% of target orders in Q1

-

The Financial Express

The lack of fresh orders and a general slowdown in the power sector continues to
trouble power equipment maker Bharat Heavy Electricals. The company bagged orders
worth just Rs 1,120 crore or 21.2% of the Q1 target. The company is facing a tough
time for last two financial years, when both its sales and profits took a big hit.
In 2013-14, BHEL for the first time even failed to meet the reduced turnover target of
Rs 43,000 crore, ending the year with a figure of Rs 40,366 crore. The Q1 order
booking is a fall of 23.6% over the same period last year, when the company bagged
orders worth Rs 1,466 crore.
REASONS:
1) Environmental Clearances is a major issue. Most of the times projects are
stopped because the authority does not permit forest areas or villages to wipe off
for a project
2) Coal Linkages are not easily available, one of the major reason is Coal Scam
3) Credit limits of banks have been reached. Financial institutions are declining the
funding of projects in the area of power sector. The banks are not accepting
further offers because they have already credited other companies and have not
received the amount so credited.
4) Slowdown in fuel is because of no fuel linkages. Coal Authority of India Ltd.
didnt have an expected production of coal, thus BHEL got a slowdown in terms
of coal as a fuel. Also coal supply declined from countries like Indonesia and
Australia which impacted BHEL production and the ongoing projects.
84

5) Coal prices hiked all over the world. Domestic production was not itself enough
and purchasing coal from outside India is expensive.
6) Demand Supply Gap increased whereas the productions halted, the ongoing
projects were scrapped off and many projects were on hold.

Major 36 projects are stuck

The flood disaster in Uttarakhand scrapped off 23 Hydro power projects. Government
still has not given a notice to re-initiate the projects as it will be of high expenditure.
Krishna Godavari D6 basin of Reliance lacked in gas reservoirs due to misleading
information which was faced by the BHEL projects and the gas projects stopped.
Therefore Thermal projects went down
Renewable Source of energy is not enough to meet the demand of the customers and the
population around but BHEL plans to install 20 GW by 2022

85

Chapter 7
Conclusions & Recommendations

86

Observations, Learning and Conclusions

Demand for power, fuelled by needs of a developing economy, will
continue to grow.
Demand is more than capacity of BHEL
PSU developers are not inclined towards Chinese
Chinese contractors are implementing about 37.7% capacity envisaged by
the power ministry under the 11th Plan.
Chinas power equipment manufacturers, leveraging their lower costs and
shorter delivery periods, have begun hitting Indian majors like BHEL and
are walking away with orders worth thousands of crores of rupees. They
are simply making hay while the sun shines.
Labor cost in China is lower than India
Value addition by labor is higher in China as compared to India
Trade Policies in China are crafted to promote exports
Steel prices in China are favorable for power generation equipment
manufacturer
Steel prices are lower because of two reasons. First, due to cost
competitiveness throughout value chian of steel. Second, price correction
due to over production of about 30 to 35%.
Infrastructure performance of China is higher than India
87

 China has a higher score on Logistics performance Index than India

Access to credit is easy and cheap in China for both manufacturers and
buyers
Chinese equipment manufacturers benefit by selling in India because they
get cheap export credit from EXIM bank of China
From the research it was found that EHEL has an issue about its delivery
record.
The spurt in demand over the past few years caught it unawares- it had
actually cut many jobs in 1999 and 2000 when demand was slack. Today
BHEL has an installed capacity of 15,000 MW is stated to have installed
capacity of 20,000 MW
There are quality issues that were found with Chinese as the collapse
of turbine blades supplied by Dongfang to the 300 MW Sagardighi
project of West Bengal Power Development Corporation.
Heavy Industries Minister Vilasrao Deshmukh announced that
Indian firms that will be favoured include BHEL and India- based
joint ventures like those between Larsen & Toubro and Mitsubishi
Heavy Industries; JSW Group and Toshiba Corp; GB Engineering
and Ansaldo Caldaie of Italy; and Bharat Farge and Alstom.
Recommendations/ Suggestions
BHEL should influence government to levy High Import Duty on
imported power generation equipment manufacturers
88

 Promotion of importance of quality (as BHEL provides high quality

products and Chinese do not)
BHEL should influence government to provide easy and cheaper credit
tackle tough competition from Chinses
BHEL should look into how it can reduce its delivery schedule
BHEL should influence the government to development infrastructure
such as roads and highway as it will help in increasing competitiveness
of manufacturing industries and enhance its logistics performance.
Increase value addition of labor in BHEL to increase productivity there
by become more competitive
Optimize value chain. With the beginning of a new ara in power
generation equipment manufacturing industry, BHEL should analyse its
value chain and should find out the areas where there in scope for
optimization
Further vendor development, BHEL should try to increase its vendor
base as it will help in reducing costs
Global sourcing. BHEL should go far global sourcing and it should look
towards foreign economies to sources inputs at lower price
BHEL should try to enter into long term contracts for procuring raw
materials at fixed low rate

89

Annexure
S.No.

Charts/Tables

Page No.

1)

Corporate Department

22

2)

Manufacturing Units

23

3)

Quality Objectives and Key Processes

36

4)

Key Roles in Map

53

5)

Map Performance Cycle

54

6)

Macro Model

62

7)

Capacity Augmentation

63

8)

Table 5.1

64

9)

Table 5.2

65

10)

Chart 5.2

67

11)

Chart 5.3

68

12)

Pie Charts

70

13)

Chart 5.4

72

14)

Table 5.3

73

15)

Table 5.4

74

S.No.

Charts/Tables

Page No.

16)

Chart 5.5

75

17)

Table 5.5

76

18)

Table 5.6

78

19)

Chart 5.6

82

90

References
www.bhel.com
www.iea.org
www.mnre.gov.in
www.coal.nic.in
BHEL Annual Report
DNA newspaper
www.moneycontrol.com
www.financialexpress.com/news/BHEL-bags-just-21--of-target-orders-in-Q1/1269623
http://www.deccanherald.com/content/162982/shocking-decline-gas-productionkrishna.html
Ministry of Power
A report on Indian Iron and Steel Industry by Corporate Catalyst India
Central Electrical Authority
Changing patterns of comparative advantage by C Veeramani
Deloitte report on manufacturing industry in China
Doing Business in China report by IMF
India Vs China: Competitiveness of steel Industry in China by Avalon Consultancy
Interactions and Discussions with industry professionals
Low interest regime must for export sector survival by Federation of Indian Exporting
Organizations (FIEO)
New competitive reality of steel by Gilles Calis, managing consultant, Steel Consult
International, Amsterdam, The Netherlands
Planning commission 11th and 12th five year plan report

91

The cost competitiveness of manufacturing in China and India: An industry and

regional perspective by Indian council for research on international economics relations

92