CAG raps BHEL for being obsolete and inefficient

India’s largest engineering and manufacturing company Bharat Heavy Electricals Limited (BHEL) made no effort to innovate or strategise its business leading to heavy losses, the Comptroller & Auditor General of India said in its audit report on the company.

 

BHEL, which has more than 75 per cent business coming from the power sector, suffered due to the slowdown in the same. 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 in lull.

 

“As BHEL had not effectively diversified into new/less operated business areas, both turnover and profitability declined sharply with slowdown in the power sector. BHEL’s turnover, which was Rs 49,510 crore in 2011-12, declined to Rs 26,587 crore in 2015-16; while profits of Rs 7,400 crore in 2011-12 turned into a loss of Rs 913 crore in 2015-16,” said the report.

 

Profits of BHEL plunged by 82 per cent -- the highest ever during Q1 2015-16 over the past year, owning mostly to their decrease in sales to the power sector. The company in a media statement in November 2017 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 Govt. 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 could not bridge the technology gap in the core power sector and made inadequate efforts to improve its competitiveness. “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,” it said.

 

The report mentioned BHEL could not secure any of the four tenders finalised against 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.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel