BHEL Looks Past Late Delivery to ONGC with 8,000 Megawatts of New Orders

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The alignment of project schedules and the integration of supply chains between owners and suppliers continue to damage the Indian power sector's ability to hit targets. Although smart-grid applications are being promoted as the means to avoid more disastrous national blackouts, secure management of project supply chains could provide an even more fundamental base for future success.

A current spat between India's state-owned Oil and Natural Gas Corporation (ONGC) (BSE:500312) (Dehadrun, India) and state-owned power equipment manufacturer Bharat Heavy Electricals Limited (BHEL) (BSE:500103) (New Delhi) concerns delays in delivery and the subsequent postponement of a power project. This comes at a time when BHEL has announced plans to undertake capital expenditures of $180 million this year on a modernization and expansion program.

ONGC is blaming BHEL for a 12-month delay in the commissioning of the 726.6-megawatt (MW) power plant at Palatana in Tripura. The contract for two units of 363.3 MW was first launched in June 2008, and was scheduled to go into operation last year.

"There is no doubt that BHEL equipment is good. But the company is far from efficient in project commissioning," ONGC told The Hindu Businessline. "ONGC had to manage for transportation after diplomatic talks with Bangladesh. This was not our job. BHEL just gave the transportation tender to ABC Ltd and then did not facilitate anything."

BHEL countered: "The project being in the northeast state, skilled manpower for civil and erection work at the site was not up to the mark. Also, due to the remote site location, the available manpower could not be retained by the subcontractors at site. Also, a change in design criteria on technical datasheets resulted in a delay of three months in commencement of manufacturing."

Transportation difficulties through rough terrain and local restrictions resulted in work being started on the erection of the GT accessory module only in January 2012, instead of the scheduled August 2011.

India's government has set a target of having a power generation capacity of 800,000 MW by 2032, and BHEL is challenged by this.

BHEL is anticipating strong growth. Current national capacity is just over 200,000 MW. The company is undertaking capital expenditures of more than $180 million in modernization and expansion programs this year.

A joint venture steel plant project will receive an investment of $72 million, with up to 40% of production for BHEL's consumption.

The company's project pipeline should see 7,000 MW to 8,000 MW in additional equipment orders before the end of the fiscal year. According to BHEL, there are no bottlenecks in overseas orders. BHEL is looking past the problems with the Tripura order.

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