India's National Magazine

From the publishers of THE HINDU

Vol. 14 :: No. 23 :: Nov. 15 - 28, 1997

PUBLIC SECTOR ENTERPRISES

The power majors

Despite the constraints placed on them by policies of liberalisation, the
Navaratnas BHEL and NTPC have the potential to be the prime movers in
any effort to revive the power sector.

This is the second article in a series on the 'Navaratna' companies.

V. SRIDHAR

THE two dominant Indian players in the power sector, the Navaratna public
sector companies Bharat Heavy Electricals Limited (BHEL) and National
Thermal Power Corporation Limited (NTPC), have borne the brunt of the
Government's controversial power policy of 1991. However, the changeover to
competitive bidding for power equipment and supply contracts offers the two
giants a window of opportunity, despite the Government's failure to provide
financial and policy support to them.

BHEL is India's leading power equipment manufacturer, and has established its
competitiveness against multinationals in the field. The NTPC generates a
fourth of all electricity generated in the country; besides, as the least-cost bulk
power generator in India, it sets the floor price for other power producers.

The first 200 MW unit of the NTPC at

Singrauli, Uttar Pradesh, which was
commissioned in 1982. The NTPC
generates a fourth of all electricity
generated in the country.

The new power policy was accompanied

by a squeeze on public investment in the
power sector. The Eighth Plan outlay for
the power sector was fixed at 18.33 per
cent of total Plan outlay. In comparison, in the Sixth and Seventh Plans, the
Plan outlay for power accounted for 20.13 per cent and 19.04 per cent of the
total. The actual expenditure during the first three years of the Eighth Plan was
15 per cent lower than the Plan outlay. During the Eighth Plan, additional
capacity of 30858 MW was expected to be added. However, only 17667 MW is
likely to be added - a shortfall of more than 40 per cent. The vacuum effect
caused by the failure of private investment to compensate for the fall in public
investment has raised fears of a serious crisis in respect of infrastructure.

Despite the constraints placed on them by policies of liberalisation, BHEL and

the NTPC have the potential to be the prime movers in any effort to revive the
power sector. The sheer scale and range of their operations ensure them a place
in any major expansion of power generation capacity. Fears of a sharp increase
in the price of power generated by private power companies have made the
Government replace the earlier policy of negotiated power projects, which
allowed cost-plus pricing of electricity, with a policy that is based on
competitive bidding. While the revised policy offers the two companies a more
level playing field, aspects of current policy cause concern.

In the case of BHEL, its indigenous capability is perceived to be threatened by

the alliances it has been encouraged to forge with multinationals. There is also
concern that NTPC, pushed towards adopting an aggressive market-oriented
posture, may raise the floor price of electricity, resulting in an allround increase
in basic energy prices. Some executives of the two companies fear that the
multinational- and market-friendly drive may provide the basis for future
privatisation.

BHEL, the pioneer in the manufacture of power generation equipment in India,

is among the top six such manufacturers in the world. It also ranks among the
top 12 engineering companies in the energy sector.

In February 1947, the Advisory Planning Board recommended that an

indigenous base for electrical machinery be established in India. In 1948, the
Sir J.C. Ghosh Committee reiterated that a manufacturing base for electrical
equipment be laid in the public sector. The Heavy Electricals (India) Ltd was
established in Bhopal in 1956 to manufacture transformers. In 1964, after
BHEL was incorporated, other units were established at Hardwar, Hyderabad
and Tiruchi with technical assistance from the Soviet Union and
Czechoslovakia.

In 1974, the Bhopal unit was merged with BHEL. It became the only company
in the world to have integrated facilities to manufacture power project
equipment - from boiler to turbine to generator. The company now has 14
manufacturing units across the country and employs 67,000 persons. It
manufactures equipment for coal, gas, nuclear and hydel power plants. BHEL-
manufactured generating sets, with a capacity of nearly 55000 MW, account for
about 65 per cent of the installed capacity in India. Being the only one of its
kind in the region, BHEL also accounts for a significant portion of Malaysia's
power generation capacity.

Despite being focussed on the power sector, over the years its capability has
extended far beyond. Indeed, this is perhaps what has saved it from the effects
of the new power policy. Apart from generators, turbines, transformers and
other equipment for power plants and power stations, it manufactures
locomotives and traction equipment for the Indian Railways, valves for
application in oil exploration and other areas, pollution control equipment,
boilers for a range of uses in industry, heat-exchangers and pressure vessels and
many other products. It also offers turnkey solutions to establish power stations
and is a leading participant in the market for cogeneration equipment.

The concept of self-reliance, an active ingredient of government policy after

Independence, laid the basis for BHEL's success. Financial and policy support
enabled BHEL to expand capacity to meet Indian requirements of a rapid
increase in power generation capacity. Being the sole manufacturer of its kind
in the country, it enjoyed viable scales of production. Today, BHEL has the
capability to produce 6000 MW per annum. A senior BHEL executive
told Frontline that in order to utilise its capacity fully, and, taking into account
BHEL's delivery cycle, the company requires annual orders of about 12000-
15000 MW of power equipment.

During 1996-97, fresh orders worth Rs. 7,188 crores were placed with BHEL
and the outstanding orders were worth Rs. 10,600 crores. Even though the
orders at hand increased by 27 per cent when compared to the previous year,
BHEL's capacity is still underutilised. During 1996-97, the order inflow for
equipment for the power sector was Rs. 4,048 crores, including Rs.2,556 crores
worth of power plant equipment. The under-utilisation of capacity in this
segment remains.

Faced with the new power policy, BHEL utilised its capacity to produce
equipment for the industrial sector, that is, for the non-power sector. Its Tiruchi
unit in Tamil Nadu, for example, has produced boilers for use in a range of
industries - from paper to petrochemicals. BHEL's equipment supplies to the
utilities in the power sector accounted for 62.34 per cent of its turnover in
1991-92; BHEL's turnover from the power sector now accounts for 50 per cent
of the company's turnover.

Ashok Rao, president of the National Confederation of Officers of Public

Sector Undertakings (NCOA) and an executive in BHEL, argues that
notwithstanding the diversification achieved by the company, BHEL's "survival
as a national enterprise depends on its ability to sustain its commercial
operations as a supplier of equipment and services to the power sector."

Prior to 1991, BHEL's unrestrained access to the Indian market enabled it to

enter into technical arrangements with multinational companies for whom
BHEL was the only route by which to reach the Indian market for power
equipment. Thus, although its tie-up with Siemens imposed certain restrictions
on BHEL, it still had first access to the Indian market for the supply of power
equipment. Siemens could not operate on its own in the Indian market. This
"monopoly" status brought significant gains. Between 1977 and 1997, BHEL
bagged 86 per cent of all power equipment contracts in India that were financed
by multilateral agencies in international competitive tendering. In all these
cases, BHEL did not utilise the 15 per cent price advantage that tender
specifications gave it as a local supplier.

Under the earlier regime, BHEL sourced technology from foreign companies,
upgrading it to meet Indian conditions. In the changed environment, BHEL is
directly in competition with these companies. Moreover, BHEL's research and
development (R&D) expenditure is small compared to its competitors: BHEL's
R&D budget was $14 million in 1994, compared to Siemens' R&D expenditure
of $4,844 million the same year. A senior BHEL executive says that the lack of
funds has meant that "scarce resources have been channelled to applied
research," for instance, to develop technologies suited to utilise the vast Indian
resources of poor-quality coal in power plants. BHEL's development of
fluidised bed combustion (FBC) technologies has applications in the utilisation
of low calorific value fuels for power generation. Its work in this area is
comparable to international achievements in the field.

BHEL does not suffer from lack of competitiveness; its problems are financial.
Dues from customers, including State Electricity Boards (SEBs), other public
sector units, the Railways and others amounted to Rs. 1,800 crores (in mid-
October 1997). This amounts to almost one-third of its turnover in 1996-97.
The persistence of outstanding dues hampers its ability to raise resources in the
form of debt from financial agencies. Moreover, BHEL's inability to extend
credit while supplying equipment puts it at a disadvantage vis-a-vis its
multinational competitors. Equity participation by equipment suppliers is a
norm in Independent Power Projects (IPP), but here BHEL's lack of financial
muscle puts it at a disadvantage.

Ashok Rao argues that lack of adequate funding for capital-intensive power
generation, transmission and distribution systems has forced Indian power
utilities to buy equipment from countries that fund specific projects. Thus,
multilaterally funded projects are based on competitive bidding and bilateral
credit is tilted towards purchase of equipment from manufacturers from the
same company as the source of funding. Ashok Rao says that "commercial
credits from Germany stipulate conditions for import from Germany."

From the standpoint of international power equipment manufacturers, the

Indian market for power equipment is significant - the size being larger than the
entire European market minus the United Kingdom and Germany. Ashok Rao
said that the recession in the power equipment market had resulted in a series of
mergers that created giant conglomerates. Asea merged with the Swiss
company BBC to form ABB; GEC merged with Alcatel Alsthom to from GEC
Alsthom. Other power majors such as Siemens, Hitachi and Mitsubishi are
diversified companies, with power equipment being just one of their many
products.

BHEL's operating profits as a percentage of sales for 1994-95 compares very

well with those of multinational power equipment manufacturers: while GE
reported a percentage of 16.2, BHEL reported 14.6 per cent. BHEL's
performance is particularly creditable because the multinationals have a higher
level of consumer goods in their portfolio of products where profit margins are
higher, whereas BHEL is mainly a supplier of investment goods that have a
longer production cycle and larger capital outlays. Thanks to the legacy of self-
reliance, BHEL's lengthy presence has meant highly depreciated assets. This,
according to Ashok Rao, has protected BHEL's profit margins.

In his speech at the annual general meeting, BHEL chairman R.K.D. Shah said
that the company would upgrade through in-house adaptations, "know-how and
know-why" that has been obtained from leading companies. He also said that
state-of-the-art technology would be brought in through licensing arrangements
with "world leaders". Shah said that BHEL's two recently formed joint ventures
with Siemens and General Electric would "source hardware and services from
the partners, thus creating additionality of business." The Navaratna status,
which allows the introduction of eminent part-time directors into the BHEL
board, is expected to facilitate the formation of more such joint ventures.

Regarding problems in arranging project finance, Shah is optimistic that the

recent line of credit offered by ICICI (Industrial Credit and Investment
Corporation of India) would provide "sales aid finance" for BHEL's supplies to
independent and captive power plants. In line with the new thrust on
developing tie-ups, BHEL made a successful joint bid for the 630 MW
Bakreshwar power project in association with Itochu of Japan. It is planning
similar arrangements for an IPP for a 420 MW plant at Raichur.

A recent study by UTI Securities Exchange Ltd found that BHEL, with its
mature power equipment technologies, has distinct advantages. The study says
that the "well-entrenched position of BHEL serves as a major deterrent to the
possibility that all global majors would impose a technology regime on BHEL."

At the shop floor at BHEL's boiler-

manufacturing factory in Tiruchi.
BHEL-manufactured power
equipment amounts to two-thirds of
the country's power generation
capacity.

THE NTPC, India's biggest power

utility, was established in 1975 to
strengthen regional grids. It utilises coal near the pitheads for power generation,
the reasoning being that generation at such locations is a cheaper alternative to
transporting coal or transmitting power across the country. Most of the funding
for its projects have come from the multilateral agencies, primarily the World
Bank.

However, immediately after the new power policy was announced in 1991, The
NTPC was not allowed to bid for Independent Power Projects (IPPs). Some of
the projects allotted to it earlier were handed over to private developers. During
the same year, the World Bank, the primary agency in respect of the funding of
NTPC power projects, refused funding, alleging that the company was in poor
financial health.

The NTPC now has 12 coal-based and seven gas-based power projects. The use
of coal, the cheapest and most abundant resource for power generation, has
enabled it to sell power at the cheapest rate in the country. The average cost of
power generated by it is a rupee a unit; at Korba in Madhya Pradesh it is only
64 paise. The Plant Load Factor (PLF), indicating the extent of capacity
utilisation of a power plant, is far higher than the national average. Last year,
the average PLF of its power plants was 77 per cent, despite the poor
performance of plants in the eastern region where the PLF was 43 per cent. To
improve the situation, there are plans to evacuate surplus power from the
eastern region to the northern and western regions.

The NTPC's first 200 MW unit for the 2000 MW Singrauli power project in
Uttar Pradesh was commissioned in 1982. By 1983-84 it had a capacity of 1000
MW, but the real spurt in growth came between 1987-88 and 1989-90, when
6713 MW of capacity was added. By this time the mega projects at Singrauli
(2000 MW), Korba (2100 MW), Ramagundam (2100 MW), and Rihand (1000
MW) were fully completed. Since then, however, capacity has not expanded at
the same pace (see chart). It now has an installed generating capacity of 16795
MW - about 19 per cent of the entire power generating capacity in India.
However, it produces about 25 per cent of the electricity generated in the
country.

The restructuring of the power sector and the 'rationalisation' of tariffs that
accompanies it, is now being implemented at the level of SEBs. The NTPC is
also likely to follow such a course. This will provide the Corporation avenues
for rapid growth in revenue.

SEBs' arrears to the NTPC have mounted. The arrears now stand at Rs. 3,800
crores, and, inclusive of surcharge, the amount is Rs. 6,200 crores. The NTPC,
the largest corporate recipient of World Bank funding, has been told by the
Bank that fresh assistance will become available only if the dues from the SEBs
are cleared.

Some of the SEBs, such as those in Andhra Pradesh and Orissa, are being
restructured through the creation of separate companies for generation,
transmission and distribution. A more moderate option advocated by critics of
such a course is a modest increase in tariffs, which, they argue, will bring down
the losses of SEBs. Ashok Rao argues that the SEBs were in "robust health" till
the 1980s. He says that the SEBs were made to bear the burden of the "populist
policies" of the Government; they were made to provide subsidies on behalf of
the state. Critics argue that the same pretext, of outstandings from SEBs, is
being extended to the NTPC so that the Corporation can increase tariffs.

The NTPC recently indicated that it would prefer to be freed from the
administered price mechanism (APM) that governs its sale price to SEBs. Its
demand is similar to that planned for the oil companies after price deregulation.
The NTPC has been allowed to set tariffs at levels that guarantee it a 16 per
cent rate of return on new power plants. The Navaratna status is likely to help
the company proceed with plans to break up the company into separate
subsidiaries, each operating as a profit centre. The reasoning is that the loss-
making units will be separated from the profit-generating units.

Although the NTPC has been referred to the Disinvestment Commission, the
Corporation's chairman, Rajendra Singh, is on record as saying that he would
prefer disinvestment after the division. The hope is that the division would
fetch better prices for shares upon disinvestment.

The company's projects in Kayamkulam in Kerala, in Yamunanagar in

Haryana, in Mangalore (where the controversial Cogentrix project is now
located) and another controversial project, the Ib Valley project in Orissa, were
all handed over to private developers after the Government announced its new
power policy. The projects in Kerala and Haryana are now back with the NTPC
because no private promoter wanted to undertake them.

Despite its aborted partnership with Spectrum Technology for the Kakinada
project, the NTPC is now keen on forming a joint venture with a company
specialising in the lucrative renovation and modernisation (R&M) business in
the power sector. Asked whether an alliance with BHEL may have been
preferable, Rajendra Singh told Frontline that BHEL had entered into an
alliance with Siemens in this segment.

The NTPC plans to add 6270 MW of generating capacity during the Ninth Plan
period and a further 8000 MW during the Tenth Plan, aiming for a total
capacity of over 30000 MW by the end of the Tenth Plan period. The outlay for
projects in the Ninth Plan is estimated to be Rs. 19,000 crores. Of the additional
capacity in the Ninth Plan, 3920 MW of capacity are in coal-based projects and
the remaining for projects utilising gas and other fuels. About 40 per cent of the
funds for the projects are expected to be raised in foreign currency from
multilateral agencies and a further 10 per cent in the form of suppliers' credit if
equipment is sourced from the multinational power equipment companies.

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Research
Desk Bharat Heavy Electricals Limited
General
BSE
Registered Office: NSE Code: BHEL Reuters:BHEL.BO
Code: 500103

BHEL House, Siri Fort - 110049, New Delhi

Telephone: 91-11-6001010(15 Lines)

Fax: 91-11-6493021/6492534
Listing: Ahmedabad, BSE, Calcutta, Delhi, Madras, NSE
Website: www.bhelis.com

Background

Bharat Heavy Electricals Limited (BHEL) was set up in 1959 by the Government of India with the
objective of creating indigenous manufacturing base for power plant equipments. Today, BHEL is the
12th largest company in the world in Power Plant Equipments manufacturing and the largest in India.
The company has the ability to manufacture the entire range of power plant equipment and has one of
the largest capacities of power plant equipment in the world. This enables the company to bid for large
power projects. BHEL's cost-competitiveness vis-a-vis international competition in the power sector can
be attributed to the factors like fully depreciated manufacturing facilities, lower labor and freight costs
and economies of scale. Apart from being the lowest cost producer, BHEL also possesses the
infrastructure that can supply power equipment for 4,000 MW of generating capacity annually.

Indigenisation of the technology - BHEL has indigenized most components and raw materials for
power plants. Technical collaborations with several foreign companies have helped BHEL to adapt and
assimilate imported technology to Indian conditions such as modification of boiler design to function
optimally with Indian coal which has higher ash content. This is evident in the 86% success rate in
bagging contracts in the international competitive bidding route.

The company operates through 14 plants and 9 service centers. The major inhibiting factor for the
growth of BHEL in the past has been lack of access to large fund base. The company is a candidate for
disinvestment as the Central Government has decided to offload atleast 20% of its stake towards a
strategic partner. This could help the company in the long run as the strategic partnership could bring in
benefits like access to new technologies and capital.

Shareholding Pattern
BHEL has a capital base of Rs. 244.8 crore
and its current market capitalization is Rs.
3451.12 crore. The company has 24.48 crore
shares outstanding. The free float available in
the market for trading is only 6% of the total
shares outstanding. Indian government holds
a high amount of stakes in the company
which is going to be disinvested in the near
future.

Board of Directors

K G Ramachandran-Chairman & Managing

Director
Pradeep Kumar - Director
J Jayaraman - Director
Shekhar Datta - Director
Tarjani Vakil - Director
K C Lahiry - Director
K S Rao - Director
Ishan Shankar - Director
M K Mittal - Director
Dr J J Irani - Director
R N Agarwal - Director
A K Chakraborty - Secretary

Business Overview

The business of BHEL is focused essentially on two broad segments, viz. Power Equipment, accounting
for 60% of revenue, and, Industrial Equipment, accounting for the rest. Earlier the company was
focused on the Power Equipment only. However, in order to reduce the dependence on power utility
providers (SEBs), the company widened its focus area and hence product base. BHEL is now
manufacturing equipments for industrial users, railways and several other industries including
telecommunications, metallurgical and process industry.

BHEL's forte is coal-based Thermal Power Plants. BHEL's products, services and projects are exported to
over 52 countries including United States and New Zealand. BHEL's market share in the coal-based
thermal power plant segment is 75%, 65% in nuclear-based thermal plants, 50% in hydro-based
thermal power plants. However, in the emerging gas-based combined cycle thermal plants, which have
short gestation period, the company has a relatively low market share of just 18%. BHEL also provides
services of erecting plants and executing projects on a turnkey basis. The cumulative capacity of power
generating equipment supplied by BHEL outside India is over 3000 MW.

Business Mix Industry Segment Break-up

The reform process in the Power sector, though initiated quite sometime back, is yet to gather
momentum. The delay could lead to low growth in downstream industries like Power Plant
manufacturers. Investments in infrastructure projects have not picked up as expected. This coupled
with excess capacity in many basic industries, such as the capital goods sector, have led to slowdown in
the growth at less than half the growth rate experienced in the previous year.

The ongoing changes in the global market for Power Generation Equipment have had a direct impact on
domestic companies. Significant industry consolidation across the continents was primarily driven by de-
regulation and opening up of many formerly protected markets. The industry was also affected by over
capacity, heavy development cost of maintaining competitive position in advanced technologies, WTO
requirements and lowering of tariff barriers. The continuing integration of the Indian economy with the
global economy has made the environment highly competitive.

BHEL was focused on reducing its dependency on the power sector because of the dominance posed by
the SEBs. Hence it forayed into the field of Industry operations as well. It also took up a lot of risk
containment measures such as entry into export markets, new market segments. The company has
always been very conservative in the sales credit front as well. Recently it has announced plans to set
up a 100% subsidiary in the field of Information Technology as well.

Performance of Segments

Its power division contributes about 60% of its total revenues. Its industry division with 40%
contribution has been consolidating its position in the Indian capital goods sector. It has increased its
success rate of bagging orders from 56% in FY99 to 65% in FY00.

03/99 03/00 %change

Sales value(Rs mn)
Industrial & traction machines 3,046.5 2,808.5 -7.81%
Power transformers 1,298.5 1,219.7 -6.07%
Switchgear 641.5 365.1 -43.09%
Sales Volume(units)
Industrial & traction machines (Nos.) 3,011.0 2,800.0 -7.01%
Power transformers (Nos.) 225.0 106.0 -52.89%
Switchgear (Nos.) 2,449.0 2,585.0 +5.55%
Unit realization (Rs/unit)
Industrial & traction machines (Nos.) 1,011,783 1,003,046 -0.86%
Power transformers (Nos.) 5,771,027 11,506,236 +99.37%
Switchgear (Nos.) 261,952 141,230 -46.09%

Comparing the sales breakup of the year 2000 and 1999, one can see that in the Power Transformers
segment, Unit Realization has increased by 99.37%. But, there has been a major downside shift of
52.89% in the volumes, which has lead to the decline in the sales of Power Transformers by 6.07%. The
Unit realizations went down in the Switchgear. The increase in sales volume did not makeup for the fall
in unit realization and hence Sales dropped by 43.09%. In the Industrial & traction machines the Sales
value, Sales volume, and Unit realization faced a decline.

BHEL's products, services and projects have been exported to over 52 countries ranging from the United
States in the West to New Zealand in the far East. The cumulative capacity of power generating
equipment supplied by BHEL outside India is over 3000 MW. The order book position of the company
and the bill-to-order ratio of the company is as follows:
1998 1999 2000
New orders (Rs. cr) 5760 5810 7210
% change -18.2% +0.9% +24.1%
Order backlog (Rs. cr.) 10400 10000 10600
% change -1.9% -3.8% +6.0%
Sales (Rs. cr.) 6470 6790 6640
% change +12.7% +5.0% -2.3%
Book-to-bill ratio 0.89 0.86 1.08

The segment wise order backlog position is as follows:

Segment % breakup
Power 57.85%
Industry 23.43%
International
12.12%
Business
Others 6.6%

Products

THERMAL POWER PLANTS GAS BASED POWER PLANTS HYDRO POWER PLANTS
DG POWER PLANTS INDUSTRIAL SETS BOILERS
BOILER AUXILIARIES HEAT EXCHANGERS AND PRESSURE VESSELS PUMPS
POWER STATION CONTROL EQUIPMENT BUS DUCTS SWITCHGEAR
COMPRESSORS SILICON RECTIFIERS CONTROL GEAR
OIL FIELD EQUIPMENT TRANSPORTATION EQUIPMENT POWER DEVICES
THYRISTOR EQUIPMENT INDUSTRIAL ELECTRICAL MACHINES ENERGY METERS
CAPACITORS SYSTEMS AND SERVICES AVIATION
TELECOMMUNICATION NON-CONVENTIONAL ENERGY SYSTEMS SEAMLESS STEEL TUBES
CASTINGS AND FORGINGS INSULATORS TRANSFORMERS

SWOT Analysis
Strengths:

The company has 180 products under 30 major product groups that cater to the needs of the core
sector like power, industry, transmission, transportation, defence, telecommunications and oil
business.
BHEL's ability to acquire modern technology and make it suitable to Indian conditions has been an
exceptional strength of the company.
Strong relationship with NTPC is a strength as NTPC is planning a capacity expansion of Rs. 52 bn
and based on the past, 85% of NTPC projects have been bagged by BHEL. The company also enjoys
purchase price preference.
Weaknesses:

PSU status is a big weakness for BHEL as it is subject to their rules and regulations and is forced to
carry a huge amount of labor force, which it is not able to retrench.
The company offers very stringent credit facilities to the customers and this is a weakness when
compared in the face of rising competition. On the other hand their customers in the power
segment, SEBs, have a huge amount of receivables standing against their name in the company's
balance sheet. This is a major weakness for the company.
The company is vertically integrated, which could have been avoided by outsourcing its components
for power generation and transmission. This could have reduced the cost.
Opportunities:

The power sector reforms are expected to pick up in the near future in India, which would directly
benefit BHEL.
Increase in defence budget will increase the topline for the company.
NTPC is planning additional capacities to the tune of 2,800 MW, at a cost of Rs 52 bn. BHEL could
benefit a lot as it has happened in the past that significant portion of the project of NTPC is handled
by BHEL. Nearly 85% of the NTPC projects were assigned to BHEL only.
The business of modernization and renovations of power plants is expected to grow in India.
The disinvestment plans of the government would bring in new resources and experience into the
company.
Joint Venture with Siemens in the name of Powerplant Performance Improvement Ltd. (PPIL), is a
major strength for the company. This tie-up will be beneficial as there is a lot of scope for business.
During FY00 the PPIL received orders worth Rs. 320 crore.
Threats:

The global trend of consolidation has already resulted in a fall in turnover of the company and this
will prove to be a major threat in the years to come as well.
The company is dependent on NTPC to a great extent.
Recently, the government has permitted the import of second hand capital goods that are 10 years
old without the need for a license. This move will definitely increase competitive pressures for BHEL.
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