Coal crisis, private player entry cause mass shutdown of BHEL ancillary units | SupportBiz

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Coal crisis, private player entry cause mass shutdown of BHEL ancillary units

The decline of Trichy’s small and medium industry supplying equipment to public sector power giant Bharat Heavy Electrical Limited (BHEL) is a classic example of how fatal the government apathy can be.

Business orders from BHEL have plummeted to the extent that the industry’s production activities today account for only about 10-20 percent of its capacity, reveals M. Srinivasan, President, BHEL Small And Medium Industries Association (BHELSIA).

“There are more than 600 units providing power equipment to BHEL and all these units depend 100 percent on BHEL for businesses. The present business scenario brought about by many reasons, have caused closure of about 40 percent of our units here,” he said.

Asked about the reasons behind the downfall, Srinivasan said: “Coal crisis is the major reason behind decline of businesses. Many power projects are on hold due to the uncertainties over the coal crisis. In fact, BHEL itself is finding it hard to get orders from their customers.” Moreover, the central government appears to be too cautious in approving new projects owning to the upcoming general elections.

On the other hand, the entrance of private power developers has weakened BHEL’s monopoly on the sector. Private companies such as Jindal Steel and Power, JSW, Haryana Power Generation Corporation, and Reliance Power have taken a lion’s share of the market, which has a directly impact on the ancillary units.

But what is more alarming is the recent government decision to allow Chinese power equipment manufacturers to set up service centers in India.  “Today, even Chinese companies are given permission. The government does not think how much the domestic industry is affected with such actions. The government seems to have lost its hope on Indian industry,” Srinivasan said.

Contrary to the general view, Srinivasan said the new policy of Away Centre Fabrication (ACF) does not hurt the industry as it's perceived to be. He said BHEL was forced to abandon the previous Outsourcing System (OS) due to unfavorable economic conditions, to adopt the ACF system whereby the ancillary units have to buy raw materials themselves.  “BHEL had to take this decision as part of its cost cutting measures. It doesn’t affect us much. We are managing to buy material and manufacture products without major dent on our financial health,” he said.

According to Srinivasan, many units in the region remain inactive now because they do not have the option of closing down operations, fearing many financial and government regulations such as the NPA. He says the need of the hour is a clear policy on power sector and a strong political will to implement policies that would help the SMEs in the sector grow further.