The concern over power producers importing generation equipment from China, which had grown to considerable proportions last year and even led to the government briefly banning such imports over ostensible 'security' concerns, seems to be fading; or so feels Bharat Heavy Electricals Ltd (BHEL).
R K Wanchoo, executive director of state-owned BHEL's RC Puram unit near Hyderabad, told reporters that earlier, both quality and service were an issue - Chinese equipment was considered more reliable on both grounds, apart from being generally more cost-effective. But BHEL was sorting out these issues and so an increasing number of previous and potential importers from China are now turning to BHEL, he said.
Without specifying the number or names of the power developers, Wanchoo said a ''large number'' of producers had cancelled their Chinese orders and redirected these to BHEL.
In addition to the price advantage that made Chinese equipment attractive, the capacity constraints of BHEL in the face of a huge spurt in demand from new projects also drove them towards imports - but capacity was being increased, he said.
As part of a capacity enhancement and modernisation plan, the unit has augmented its facilities and machinery by investing more than Rs900 crore, Wanchoo said.
He said project developers were choosing BHEL not only for its equipment quality but also the reliable and extensive network of its after sales services. Above all, the company produces custom-made power plant equipment, he added.
The slowdown in execution of power projects across the country due to coal linkage and environmental clearance issues has indirectly worked in favour of BHEL as the demand for quick delivery of equipment has subsided. There was no instance of delay in delivery schedules reported during the year, according to Wanchoo.
At a press conference on the plant's annual performance, Wanchoo said voluntary requests for postponement of some delivery schedules saw the RC Puram unit clock moderate sales revenues of Rs7,072 crore in 2011-12; yet the factory fully utilised its manufacturing capacity through during the year.
Besides, foreign orders have almost dried up for the unit with exports accounting for only about Rs200 crore during the last financial year. ''Exports used to have a 20 per cent share in our annual revenues. This has drastically come down because there is no significant capacity expansion happening outside India and China,'' Wanchoo said.
The unit has an order book worth Rs15,000 crore to be delivered in the next 24 months.
Despite the moderate growth in total revenues, the company was able to increase the gross profit by 38 per cent, mainly by bringing down the material costs by 2 percentage points to 60 per cent among other cost-saving measures, according to Wanchoo.