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Interaction | August 2015

Our aim is to make all sick PSEs profitable

Anant Geete, Union Minister for Heavy Industries and Public Enterprises, Government of India is on a mission these days. His prime task is to help BHEL regain its past glory and to make all 21 CPSEs profitable. In an exclusive interview, Geete tells POWER TODAY that his ministry has received the nod to provide Rs 580 crore for R&D in the capital goods sector, besides in-principle approval for a Rs 2,700 crore solar manufacturing project in Maharashtra.

Let me have your views on the ministry´s performance in the past one year? What are your achievement and through this interview, would you like to make some more announcements?
Under the strong leadership of Prime Minister Narendra Modi, I got the opportunity to head the Heavy Industries Ministry in which BHEL comes under my purview. If you analyse BHEL´s financial progress in the past two-three years, the company has been under tremendous pressure, mainly due to the coal scam that shook India. The ban on coal mining in the country has led to its unavailability for thermal power plants and has hampered announcement of new projects.

In addition, it has also taken a toll on those stuck projects which were cleared by the Project Monitoring Group. Meanwhile, since BHEL manufactures most equipments required by the power sector, this has put added burdens on its finances and is being reflected in their top and bottom line.

Now, with the recent coal re-allocation and the government´s aim to improve the domestic production to one billion tonne, it is expected that production cost of new and established power plants will come down. This is mainly since our major intake of coal was costly imported coal, and the rise in domestic coal production will avail cost effective power production.

Meanwhile, coal availability has also given the government a sense of confidence to first release stuck projects and in later stages, announce new ones for the envisaged investments.

The sentiment seems to be positive and going forward will certainly help BHEL strengthen its financials.

But are the initiatives in favour of BHEL?
I must admit here that, the results of above initiatives have started showing. In this context, the newly formed state Telengana has awarded Rs 18,000 crore worth of work to BHEL, recently. This is touted to be one of the largest orders placed by any state to BHEL, in the recent period. In addition, Tamil Nadu government has also signed a Memorandum of Understanding (MoU) with BHEL worth Rs 5,000 crore. Besides this, BHEL has also signed an MoU with Russian company INTMA, to set up a gas-based power project in Kazakhstan. Currently, BHEL is executing 23 major projects in 16 countries and has a presence in more than 75 countries.

So, BHEL will have “Acche Din“. During the year 2013-14, out of 21 operating public sector enterprises (PSEs), around 13 PSEs were posting profits. But, after taking over the heavy ministry in 2014, in just one year, we have increased the profitability of 17 PSEs. So in the last financial year, our ministry has managed to increase the profits of four CPSEs. Going forward, by the end of the current financial year, we are aiming for all our operating 21 PSEs to be profitable.

What is your ministry´s plan to diversify BHEL´s presence?
These days, renewable energy is the buzz word and solar energy will play the big brother role in it. But to become self reliant on the manufacturing side for solar panels and modules, we just have installed capacity (manufacturing) of around 4,000 MW, which is comparatively less against other countries.

In this context, BHEL will diversify its presence in renewable manufacturing, for which we have already taken major initiative by setting up a solar cell manufacturing unit in Bhandara, Maharashtra, with an investment of Rs 2,700 crore. For this project, the Cabinet has given us an in-principle approval, and we have sent a proposal to them for financial approval. We are expecting a favourable response from the Finance Ministry in next two-three months.

I have also suggested to the BHEL management to manufacture seamless pipes, to boost revenue for the company. The aim behind deciding to manufacture seamless pipes in full force was to give competition to Chinese importers. Since the market has been captured by Chinese players, our ministry is pushing BHEL to produce these here in India and make them available for Indian companies.

Private players are unhappy with the government´s ´level playing field.´ A major share of orders (~ 89%), has been bagged only by BHEL. So where is the competitive environment?
This is a wrong perception. Like private players, central public units too have aggressively made inroads, so it is wrong to say that CPUs have an advantage, as they too face competition from private players in the power sector. We have instances, where even PSUs have to face the wrath of growing competition in this space. This is because, while private players enjoy some kind of freedom and autonomy, PSUs on the other hand have certain limitations and are always required to depend on state and central government directives.

All private players consider profit and loss before making decisions and we have witnessed how private players, despite having an understanding of projects that may turn out to be loss making, tried to bid for it. But this is not the case with public enterprises. Their decision is based on the government´s directions. But yes, I am of the opinion that not only large-size players, but also mid and small-size players should get equal opportunities in this sector. I also want to share with you that, since my ministry comes under the capital goods sector, the main challenge that we are facing at present is on the research and development front. It is this specific sector which has been supported by small and medium enterprises (SMEs) and hence, to enhance enhance R&D, our ministry has allocated Rs 930 crore to SMEs. The Centre will also provide support with a financial sum of Rs 580 crore, and the remaining sum will be borne by associations affiliated with the capital goods sector. We will be opening four R&D centres across India, which are yet to be finalised. Importantly, the funds, set aside by the government, will also be utilised for technology adoption. Out Rs 580 crore, we envisage Rs 90 crore for technology adoption initiatives. Meanwhile, when we did an internal assessment of what has gone wrong with BHEL, we noticed that even though their capacity utilisation expanded from 10,000 MW to 20,000 MW, it has received orders only for 10,000 MW. This was due to slow project execution and basically low fuel supply.

However, IPPs are of the opinion that BHEL did not have capacity to take intake new orders and were inclined towards imports...
No, this is an absolutely wrong theory by IPPs. Just because, BHEL has sold their equipment at a higher price, as compared to Chinese players, IPPs should not blame BHEL´s capability on new order intake. And, most of the IPPs were inclined towards Chinese equipment due to low cost.

But, just because they get cheap Chinese equipment, do they get a quality product?
I don´t think so. However, now IPPs have realised the importance of BHEL as the company manufactures quality products rather than just cheap ones.

I agree with your initiatives, but if we look back, we also lack in providing skill-based education to the people who are associated with the capital goods sector...
You have raised a valid point here! Since our Prime Minister has announced the ´Make In India´ campaign, to make it successful, we required to develop the skill of the youth. I should thank our PM that this will be the first time in India that we have a separate ministry for skill development. I must tell you that Indian market provides lots of opportunities to the foreign entities, and investment worth billions have been lined up recently. So to provide them a skill-based workforce is our prime agenda, and we are working towards it. Our ministry has directed and mandated that all the CPUs establish their own skill development units, following the footsteps of BHEL. Thus, when we develop our own skill workforce, the days are not far when we can successfully implement the ´Make In India´ dream.

Your ministry has prepared and submitted the ´Make in India´proposal to the government of India recently. Tell us about the same...
With reference to the heavy industries ministry, we have submitted two proposals to the finance ministry. To start with, we have submitted Electric Mobility Mission, under which, we are proposing to invest Rs 14,000 crore in this mission till 2022. The finance ministry has given ´in-principle´ approval for the mission as of now. Through this mission, we will be implementing electric powered battery-operated public transportation systems in major urban cities in India. The mission will start from Delhi and then gradually lead to other metropolitan cities. We will be converting most of the buses in Delhi to be run on electric power. You won´t believe that if we entirely implement this scheme, India will save fuel to the tune of Rs 60,000 crore. For 2014-15 and 2015-16, the government has agreed to release Rs 750 crore.

What initiatives have been taken by your ministry to encourage the solar sector?
For this sector in particular, we have already asked the Central public sector enterprises to contribute in a big way to achieve the target set by the power ministry. Meanwhile, in Sambhar Salt in Rajasthan we will be implementing a 1,000 MW solar power project, which will cost around Rs 6,500 crore. In total, we will be setting-up 4,000 MW of solar power projects in the state, of which for 1,000 MW MoU has been already signed between BHEL, Solar Energy Corporation of India (SECI), Sambhar Salt Ltd (SSL), PGCIL, Satluj Jal Vidyut Nigam (SJVNL) and Rajasthan Electronics & Instruments Limited (REIL). The project will come up on surplus land available with SSL in Sambhar. The equipment will be supplied by BHEL, power evacuation infrastructure will be put up by PGICL, sale of electricity would be done by SECI, operation and maintenance by REIL and project management by SJVNL. The project will be developed in different phases in seven-eight years.

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