Maharatna loses sheen: BHEL obsolete and inefficient, says CAG report

Bharat Heavy Electricals Limited (BHEL), one of the jewels in the public sector enterprises (PSE) universe, turned into a loss making company for the first time since its inception.

A Comptroller and Auditor General's (CAG) report presented in Parliament stated that the company made no effort to innovate or strategise its business leading to heavy losses. The country's biggest blue chip company incurred a loss of Rs 913 crore in the financial year 2015-16, the CAG report revealed.

"It's heading towards a disaster," Hindustan Times reported quoting a CAG source, who is a part of the audit team. "Chinese companies are far superior in quality, innovation, pricing and timely completion of the project."

BHEL, which has more than 75 percent business coming from the power sector, suffered due to the slowdown in business in the power sector. CAG observed that as BHEL did not diversify into other business areas, its turnover reduced by more than half in three years when power sector went into a lull, reported Business Standard.

"As BHEL had not effectively diversified into new/less operated business areas, both turnover and profitability declined sharply with slowdown in the power sector," said the report.

BHEL's turnover, which was Rs 49,510 crore in 2011-12, declined to Rs 26,587 crore in 2015-16; while profits were Rs 7,400 crore in 2011-12, it turned into a loss of Rs 913 crore in 2015-16.

The company in a media statement in November 2016 said, as a part of the new shift in the corporate plans, it will be creating new verticals within the company to capitalise on the massive infrastructure spending by the Government of India. "Special focus would be on Indian Railways, defence and other industrial products to drive the next wave of growth," said the company's statement.

CAG, however, has raised questions over the same. It said, "BHEL had fixed Strategic Plan targets for the period 2012-17 with focus on diversification and innovation. However, BHEL did not set year wise milestones for implementation of the envisaged strategies. BHEL could not achieve any of the strategic plan targets till 2015-16 and shortfall ranged between 23.33 and 113.91 per cent against specific goals"

The report further mentioned that BHEL could not secure any of the four tenders finalised against the competition during 2015-16. It also could not complete any of the projects selected for performance audit within scheduled completion time. "All 53 selected projects were commissioned with delays of three to 84 months. As a result, customers withheld Rs 1,966.07 crore towards liquidated damages against 37 of these projects," cited the report.

"BHEL needs to develop its own products that excel over competitors through R&D initiative. Expeditious efforts should also be made to forge technological tie ups in new business areas," recommends the CAG report.