IE commenced publication on 15 March 1968. In our third issue dated 15 April, IE carried a short report expressing concern over BHEL losing the order for a boiler from Madras Fertilizers. The American International Oil Corporation, co-promoters of Madras Fertilizers and Madras Refineries, organised import of the same.
Within a couple of days I received a letter signed by V Krishnamurthy, then GM, BHEL-Tiruchi, referring to our report and inviting me to visit Tiruchi to see the kind of work done. The next week I visited Tiruchi. VK arranged to receive me at the railway station, put me at the Cauvery guest house and lined up detailed visits around the sprawling plants. Throughout the first day I had detailed meetings with senior managers,
S V S Raghavan, M R Naidu, Cavinathan, V R Deenadayalu… (All these evolved as business leaders of repute!). The next day VK apprised me with extensive information on the state of the power equipment industry. The meeting lasted three hours (1000 hrs to 1300 hrs). It was my early experience visiting a large public sector undertaking and it was great education. I was amazed at the plant winning orders for its boilers from Malaysia (long before its first boiler in India was fired at Ennore in 1971!).
I was instantly sold on BHEL and the public sector. That visit kindled my interest to look at dozens of PSUs spread across the country. I have covered dozens of public sector steel, coal, aluminium, copper and zinc plants, refineries and fertilizer units, thermal and nuclear power plants, oil fields…
Since then I have been meeting VK, SVS and most of the subsequent CMDs and Directors of BHEL and visiting its plants at Tiruchi, Hyderabad, Hardwar, Bhopal, Ranipet as a sort of pilgrimage. These visits have helped expand my knowledgehorizons on large scale manufacture of capital equipment, their erection and performance. More important, to interact closely with several builders of modern India and admire their sterling contributions. I remember interactions with leaders like VK and SVS Raghavan and a galaxy of technocrats like Wadud Khan, M Rama Brahmam, P T Venugopal, S P Wahi, D V Kapur, K C Khanna…
Those were years of the public sector reaching commanding heights. The tall leaders of PSUs were so passionate and committed; they ensured spectacular expansion of the units under them. BHEL was indeed a gem among these.
The bang and the whimper…
With this background it is so pathetic to see the steep deterioration in the performance of several PSUs. For one thing, post 1991 liberalisation, the economy was opened up for private competition, especially from MNCs across the globe. More important was the opportunities unfolded for
talented managers, not restricted to joining large PSUs. Add to this a heterogenous political leadership of coalition governments that had the compulsion to accommodate candidates nominated by the constituent parties. If UPA didn’t have the power over choice of the incumbents of ministries allotted to DMK, RJD or TMC, NDA had similar compulsion of accommodating the nominees of regional parties like Shiv Sena, RJD or LJP; and, in turn, had to cope with top officials selected not purely on merit or competence. There is the added factor of the BJP holding that business is best left with the private sector.
Today there is serious erosion in the value of a PSU. In the case of BHEL which was on par with L&T in terms of its reputation and capabilities, such neglect has resulted in steep erosion in its net worth. BHEL’s revenues were at the peak at Rs 50,156 crore with net profit of Rs 6615 crore in 2012-13. Revenue from operations dropped to nearly a third to Rs 17,308 crore with record loss in its operations of Rs 2717 crore in 2020-21.
Leaders who took BHEL to commanding heights…
For decades BHEL led the public sector reaching commanding heights. It excelled in every branch of power equipment manufacture. The massive expansion of power generation capacity was helped by BHEL constantly upgrading technology and size of equipment. It standardised the multiplicity of designs initially brought in by different suppliers – British, Czechoslovakian, German, Russian… In rapid succession the size of equipment was scaled up from 60 MW – 100-120 MW – 200-250 MW, 500 MW – 660-800 MW… There was constant endeavour to expand the range of products that included high capacity motors, transformers and switch gears, railway traction equipment… and also to a range of electronic products. The corporation also had strong R&D facilities. Most importantly, its leaders like VK and Raghavan retained communication experts like R K Swamy to publicise its spectacular record.
BHEL’s imaginative management offloaded a large portion of non-core activities to dozens of ancillary units. The high pressure boiler plant, Tiruchi spawned dozens of vendors at Chennai, Ranipet and Tiruchi. These enabled Tiruchi to expand its output continuously from around 100,000 tonnes to more than 500,000 tonnes.
BHEL looked for opportunities outside the power sector. When ONGC was rapidly expanding in the 1970s, BHEL diversified its production to oil field equipment and soon after to nuclear turbines. With its rich fabrication facilities, it was well equipped for such diversification. The company also developed export markets in Asia, Africa and Europe. At peak its turnover crossed Rs 50,000 crore with more than 13 per cent profit.
Even in the two decades post-liberlisation BHEL registered continuous growth. For one thing, electrification was given priority and handsome allocations were made to reach the goal of power for all. With assurance of large orders, more players entered the field. These included large multinationals like Mitsubishi as also mid-sized companies like Cethar Vessels, BGR Energy Systems…
With globalisation, the advent of WTO of improved comfort on foreign reserves and aggressive marketing by large global power equipment manufacturers, especially from China, the near monopoly enjoyed by BHEL ended. When the UPA I government under Manmohan Singh announced nine ultra mega power projects of 4000 MW each, there was chaotic rush for bidding with half-baked, unrealistic norms (eg. fixed tariff for 20 years not factoring escalation in the costs of coal and other inputs). Over 10 years, except Tata Power, of the other eight successful bidders for these, (three belonged to Reliance Power), just one was completed.
The other development, the welcome focus on non-conventional energy, shifted attention to solar power. The power giant BHEL unfortunately failed to grab opportunities unfolding in this area.
The UPA II government was bogged down with corruption scandals from 2009. Large number of companies entered the power sector and, with little experience or finance capabilities, became non-starters. This chaos did impact BHEL and its decline started in 2015.
Sadly, the NDAII government that came to power in 2014 did not exert to stem the decline. BJP proclaimed that it was not the business of the government to run business. As in the case of public sector banks, poor attention was paid to searching and nurturing high quality, dedicated talent to head the PSUs.
BHEL had brilliant and dedicated leaders like V Krishnamurthy, S V S Raghavan, K G Ramachandran, B P Rao… who took the company to great heights. In its evolution the company had the vision to look ahead and seize opportunities in emerging areas which insulated the company from demand fluctuations. But that attention to spotting and nurturing talent has been missing.
With the increasing concern for environment protection the writing on the wall was clear. Coal-fired boilers with extensive pollution caused to the environment were shunned by developed countries. Germany, for instance, invested massively on solar power. BHEL that had a yen for innovation and R&D in its initial decades just did not seize opportunities in non-conventional, renewable energy business. It missed out earlier on wind turbines. Even while the government was announcing massive capacities for solar, wind and other renewable sources of energy, BHEL has been content to scout for orders for coal-based power equipment.
Not long ago BHEL was ahead of L&T in terms of the size of its operations. It could easily have taken the route of L&T in looking for emerging opportunities. In 2020-21, L&T’s revenues were at Rs 76,751 crore against Rs 17,679 crore of BHEL. Like L&T, BHEL did have the capabilities to win total EPC contracts from concept to commissioning; it had an excellent record for winning custom from dozens of developing and even developed countries.
Today large engineering companies like L&T, Tatas, Mahindras, Ashok Leyland… are active in the manufacture of defence equipment. BHEL has rich capabilities for design and fabrication of a vast range of sophisticated equipment for a variety of defence needs. One doesn’t hear of any exertion by the current leadership of BHEL in these emerging areas.
If the NDA government believes in privatisation, it should have done it when BHEL was at its peak with booming revenues and profits and hence with its share value. Like Air-India, it would be a struggle to find value for this Maharatna when put on the block for privatisation now.
