India's BHEL Strong on Research & Development Innovation and Capacity, but Needs State for Orders

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Bharat Heavy Electricals Limited (BHEL) (BSE:500103) (New Delhi), India's major power equipment manufacturer, is making an initial investment of more than $92 million to set up a new power equipment fabrication plant at Bhandara, in Maharashtra. It is a greenfield project and will create 700 direct jobs.

At a foundation stone-laying ceremony, BHEL chairman and managing director B. Prasada Rao said that India's installed power base was projected to grow at a much quicker pace in the coming years. "The government has drawn up ambitious plans for adding 234,000 megawatts (MW) to the power generating base by 2017," he said.

The company also is working on technological innovations to enable power plants to be able to switch between imported coal feeds for power plants and domestic coal supplies, which will give it an edge over competitors. Customers have requested this initiative, which will not require a major investment.

BHEL may invest about $240 million in research and development (R&D) activities in the current fiscal year. In the last fiscal year, R&D investment increased year-on-year by 4.1% to more than $230 million. Turnover in the last year from products developed in-house contributed $1.8 billion, which was 19.3% of total company turnover. The R&D division filed 385 intellectual property rights comprising copyrights and patents in the last year, taking the company's overall tally to 2,170 patents and copyrights.

A dampener on all the positive news for BHEL is that although its annual equipment manufacturing capacity has gone up from 6,000 to 20,000 MW, the number of orders received did not move up correspondingly. A parliamentary panel was told that that the company's order book recently came down to about $6 billion from an anticipated $11 billion, and it is expected to shrink further through 2016. Still, the company says that it has 14,000 MW of projects "already lined up" for this fiscal year.

To counter this trend, the panel directed that BHEL must get orders from the defense sector to support the state-owned power and manufacturing utility.

For related information, see April 8, 2013, article - BHEL Licensed to Manufacture Mitsubishi Flue Gas Desulfurization Systems in India.

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