IT WAS JUST after the launch of IE, in March 1968, that we carried in its Glimpses column a short note on BHEL-Tiruchi. We wondered why the sprawling unit, manufacturing industrial boilers, was losing a bid to win an order from Madras Fertilizers Ltd. Within days, I received a two-page letter, which provided an outline of the issue. The writer invited me to visit the temple town and have a look at the facilities. One V Krishnamurthy signed it. He was the company’s General Manager.
Export to Malaysia – well before first boiler was fired in India!
When I visited the production facilities a week later I was deeply impressed with the passion and involvement of the workforce and their ability to produce sophisticated equipment to strict time schedules. What impressed me most was BHEL-T winning an order for boilers from Malaysia - three years before the first BHEL boiler was lighted at the Ennore thermal station!
My fascination for BHEL, which started in 1968, has continued through these 46 years during which I visited the various plants of BHEL spread across India and the several sites where BHEL equipment were installed and have been operating quite effectively. The visits to Tiruchi have been like pilgrimages undertaken at least once a year for getting myself updated on the expansion of facilities and reporting on the progress.
I had expressed my amazement on the utilisation levels of equipment supplied by Czechoslovakia on identical terms and comparable costs at two different plants – one at Tiruchi and the other at the Bharat Heavy Plate and Vessels Ltd. (BHPV) at Visakhapatnam. While the former has grown into a highly sophisticated plant that accounts for a turnover of over Rs 15,000 crore, the BHPV plant attached to the Ministry of Fertilizers, did not do well, turned sick and was later taken over by BHEL. While BHEL-T expanded output manifold by path-breaking development of ancillary industrial units and constantly upgraded technology through collaborations, BHPV turned sick.
When BHEL reached commanding heights…
The next major milestone was 1972. VK successfully convinced policymakers in Delhi to merge the much older unit of Heavy Electricals (India) Ltd with BHEL and form a single large power equipment manufacturer, BHEL. It was a herculean task bringing about a synthesis of cultures of the two different units. The initial doubts and resistance by senior managers were tackled by making them work in much higher positions at the different plants.
In quick time BHEL emerged a leader not just in the field of power equipment manufacture but also in the public sector. I remember the vibrant media campaign of BHEL through R K Swamy of HTA to highlight the commanding heights reached by the public sector. Particularly fascinating was the record of the giant company to expand its range of products ramping up the capacities of the individual plants spread over the country.
The best proof for the success of BHEL through the 1970s was the ability of the company to supply top talent for occupying high managerial positions. From the earlier practice of such talent largely supplied by multinationals like Hindustan Unilever, ITC and the Indian Railway, from the 1970s one witnessed BHEL supplying chief executives both for the public sector and for private enterprises!
In 1977, I was in Delhi around the time that VK got appointed as Secretary in the Department of Heavy Industry. When I dropped in to offer my congratulations, he suggested my visiting Hyderabad to see the facilities there. I joined VK and other directors in the flight to Hyderabad and was taken to Ramachandrapuram along with them. Over time, the Hyderabad unit has taken up a spectacular diversification: new product lines for manufacture of oil rigs for meeting the requirements of ONGC at the Bombay High which was then peaking production, and a vast range of industrial equipment and switch gears were introduced as also a separate division was set up for R&D.
The waning of BHEL for several years post 1970s when both VK and SVS Raghavan left, was marked by this giant corporation losing its prestige and clout. One witnessed a re-bound of this only in the boom years in the new millennium. The UPA I government gave a high priority for power development. BHEL was then ready to grab this and in quick time re-bounded to its old stature of a true leader in the public sector.
Building Maruti from scratch…
Indira Gandhi requested VK to build the Maruti factory in the aftermath of Sanjay Gandhi’s death. VK describes in great detail the initial challenging years of Maruti. He held to his promise on delivering the first vehicle by the end of 1983, less than three years of taking charge.
I met him in 1984 and asked: how did he have the confidence of the market absorbing 100,000 cars at a time when total size of the market, fed by three Indian manufacturers, was just around 40,000. VK’s reasoning was grand: “the Maruti 800 is a state-of-the-art product. It promises a saving of Rs 1000 per month on maintenance. Thus, in four years the saving will be around Rs 48,000, which is more than the initial price announced of Rs 47,000. Thus, every buyer of Maruti can easily go for a replacement by the sheer savings involved!”
A new work culture…
Maruti’s success is a marvellous story by itself, worthy of a global case study. It marked a Hanuman jump over technology adopted by the earlier manufacturers of Hindustan Motors, Premier Automobiles and Standard Motors that were obsolete and beset with low volumes of production and restrictions on capacity. These manufacturers did not have much elbowroom for upgradation of technology. VK describes the phenomenal care bestowed by him in selecting the collaborator, his top management team and in quietly adopting several of the salutary practices he had introduced in BHEL.
The advent of Maruti was a watershed in upgrading not just production technology in the engineering sector but in the introduction of a vast new work culture. These were later adapted to great profit by hundreds of manufacturing concerns.
Of course, there was no dearth of sceptics. I remember my discussions with a few captains of industry involved in the manufacture of automobiles and components in Chennai. These were content with the volume of business offered by Telco (Tata Motors) and were not quite impressed with the promise of Maruti to raise the production to 100,000 cars in quick time. But once VK established the capability to walk his talk, these rushed to register with Maruti as suppliers.
Fabulous financial engineering
It was not just an engineering marvel; it was financial engineering at its very best. In the initial years Maruti opened bookings requiring a deposit of Rs 10,000 per car for registration and a system of allotment that was transparent. The first bout of registrations saw the company garnering Rs 130 crore by way of deposits. The company paid seven per cent interest to the depositors. The second bout garnered another Rs 140 crore. The opening for Omni received an equal sum and when Maruti announced bookings for its 1000 cc car there was a mad scramble. Many borrowed money from the banks for depositing the initial fee of Rs 25,000 to book profits on re-sale of such vehicles, if allotted. The bookings were for a massive 250,000! This helped the company garner around Rs 625 crore! The company lent these money to other public sector undertakings at an interest of 15 per cent per annum. In the initial years, Maruti earned more income through this finance engineering than from car sales!
VK set new norms for production management…
There was disbelief over the phenomenal success of Maruti under VK. The ability to raise production to 100,000, quality and reliability, the low maintenance costs and comfort of driving resulted from the country catching up with state-of-the-art technology and management. Maruti set the standard for its production, sales and services.
The sceptics were not confined to India. I remember my meeting with the then Chief Executive of Talbot Motors of UK at the Paris Motor Show in 1982. He remarked ruefully: “Mr. Krishnamurthy seems to be quite enamoured over the technology agreement with a small car manufacturer in Japan. He declined the very generous offer made by Talbot Motors to transplant its entire assembly line along with the machine tools at a throw away price.”
I pointed to him that why would he grudge the first major attempt of India to catch up with technology. Maruti truly helped the industry gain confidence to access and assimilate technology to scale up production volumes. Along with Maruti came the technology for light commercial vehicles. The real boost to the sector came post 1991 when the country set on the liberalisation path pushing back the old controlled economy.
In just about a decade, over a dozen foreign manufacturers of automobiles had set up shop in India. Today, many of them enjoy great custom through exports. Hyundai and Nissan export around 200,000 cars a year. Maruti, right from the beginning, has been enjoying a large export volume despite huge domestic demand.
SAIL – a tough sail
VK’s assuming charge as Chairman of SAIL in 1985 at the behest of Rajiv Gandhi was among the most difficult of his tasks at the helm. In the case of BHEL and Maruti he had the advantage of building these from scratch and experimenting with many new concepts. At SAIL, a well-established company, it was not that simple. At the time he took charge in 1985, SAIL was suffering from low productivity, high costs, poor quality, little customer orientation and low morale of the work force. VK describes in detail how he took great pains to interact with groups of the large workforce which, at that time, was in the region of 240,000 spread over several plants in different parts of India. He had to take tough decisions. Most sensitive of these related to his bold announcement that there would not be any over-time. Unlike in BHEL and Maruti, VK had to contend with a very large number of trade unions, which were very strong, especially in Durgapur.
In the five years he was at the helm at SAIL, he transformed the company into one that increased productivity manifold. There was a huge focus on quality and customer orientation brought about for the first time. I consider the transformation of SAIL as among the high points of VK’s tenure at the helm at the three companies.
Colossus of Indian manufacturing
At the helm - A memoir VK describes in detail his approach to industrial organisation and management. For three decades from the 1960s VK strode the industrial map of India like a colossus. The country owes a great deal for the enormous contribution made by him during this period. From very modest beginnings, by sheer brilliance, VK could reach great heights and developed the capabilities of India in three great companies.
His very rich experience, again, was put to good use by the UPA government. As Chairman of the National Manufacturing Competitiveness Council VK brought into focus the manufacturing sector.
His memoir provides deep insights into the evolution of several manufacturing practices. Most significant of this relates to the evolution of Indian work ethics. VK almost single-handedly established the Indian model of management laying great emphasis on communication with the work force and establishing the capability of the public sector chiefs to manage large enterprise s effectively.
I felt VK should also have referred to his family relations and experiences in his memoir. Though he had dedicated the book to his wife Rajam, disappointingly, there was not much narration of the evolution of his family through the last six decades.