Son of a Somnolent Father
Can BHEL be saved?
Public enterprises are an important part of the economy, but they do not get even a tenth of the attention they should. The general feeling is that they will continue to do badly, that the government will never have the courage to do something about them, and that the taxpayer will continue to pay for their losses as a result.
But sometimes, such a sweeping prejudice can be inaccurate and unfair – take Bharat Heavy Electricals ( BHEL), for instance. For over half a century, BHEL has been erecting power stations and transmission lines for state electricity boards; none of them has had much to complain about. BHEL could have a lot of complaints if it were allowed to express them; but it is a faithful slave of a central minister, and behaves as inconspicuously as a newly married Hindu bride. But if the minister does not wake up and rouse his Prime Minister, he may come to do serious damage to the Indian economy. If he does not believe me, he only has to look at the accounts of BHEL.
Five years ago, BHEL had a turnover of `50,000 crore; that made it one of India’s heavyweight companies. By the year ending in March 2016, its sales had nearly halved to `26,600 crore. Its workers and administrators cost the same. So its enormous profit of `11,100 crore of 2012/13 was converted to a loss of `500 crore in the last financial year. The latest news has been sold as a turnaround. “Having achieved the immediate target of regaining growth, the company is now enhancing its focus on maintaining leadership status in the power sector while diversifying in the non-thermal power segment and other new areas,” said CMD Atul Sobti; and BHEL announced a 40 per cent dividend. But he did not mention that its profit in the third quarter was less than a billion rupees, and that it was going to end the current financial year with flat sales. Inventories, work in progress, net current assets – they all fell because business was declining.
The precipitate fall in sales denotes loss of domestic market; the most important gainers have been manufacturers abroad. The result has been pressure on the government from domestic manufacturers to ban imports from China. Why? Patriotism is the last resort of the scoundrel; it is easy to spread fear that the Chinese must be hiding spying equipment in their machines. The Chinese are good not only at making generators, but also at making power system control instruments. Some Indian cities were attracted to them, and immediately the cry went up from scoundrels – spy! Spy! The noise doubled when China blocked India’s call to declare Masood Azhar a terrorist: stupid patriots never consider that China is much more likely to be sensitive to Indian sentiments if India were one of its biggest customers. Importing what the Chinese make cheaply is good economics, and good economics is good patriotism.
Anyway, Chinese power equipment is so cheap, and its main buyers – the state electricity boards – are so influential that the government is unlikely to curb its imports and break WTO rules of fair trade. BHEL has seen the writing on the wall. That is why it has decided to diversify, and is looking at electric vehicles. Electric transportation has long been established on rail, but is in its infancy on road. It has been experimented with for more than thirty years, but commercial success has escaped it till now – largely because a road vehicle has to carry a battery powerful enough to travel fifty or hundred miles before recharging, and such a battery has hitherto weighed too much. When it becomes economical, it is likely to power large vehicles such as trucks and buses; that is what BHEL must concentrate on. BHEL has faithfully served the state power sector for half a century; it is time it ventured into newer, more promising markets and technologies. ~
The writer is a senior economist and was chief consultant in the finance ministry from 1991 to 1993
It is time BHEL ventured into newer, more promising markets and technologies