NTPC, BHEL to form JV

The country's largest power generator, NTPC, will be forming a 50:50 joint venture company with the country's largest equipment manufacturer, Bharat Heavy Electricals (BHEL), for implementing engineering procurement and construction (EPC) activities in the power sector on mutually beneficial terms.

The government-controlled companies signed a Memorandum of Understanding (MoU) for this purpose today, individual statements from both the companies said.

The MoU marks an interesting détente between NTPC, which was planning to backward integrate into equipment manufacturing, and BHEL which was threatening to forward integrate into generation.

Some see the move as a peace accord, brokered by the Prime Minister's office, between the ministry of power, which controls the Rs 35,380-crore NTPC, and the ministry of heavy industries, which controls the Rs 18,000-crore BHEL.

The two ministries were blaming each other for the dismal performance of the power sector during the 10th plan (2002-2007), when just about half of the targeted 41,000 mw was added to generation capacity.

While the power ministry blamed inadequacy of equipment for poor performance, ministry of heavy industries blamed the power generator for poor planning, leading to bunching of orders and a delay in deliveries.

Details of the new company, where the post of CMD shall be rotated among the senior officials of NTPC and BHEL, are likely to be finalised in the next few weeks, said BHEL's chairman and managing director A K Puri.

BHEL has already supplied 19,000 mw of power equipment to NTPC, its largest customer, and another 8,000 mw of projects are in the pipeline.

Though EPC is a part of some of BHEL's contracts, it was just supplying equipment to NTPC so far.

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NTPC was planning to backward integrate into equipment manufacturing, while BHEL was threatening to forward integrate into generation

Some experts see the move as a peace accord, brokered by the Prime Minister's office, between the ministry of power, which controls the Rs 35,380-crore NTPC, and the ministry of heavy industries, which controls the Rs 18,000-crore BHEL

Details of the new company, where the post of CMD shall be rotated among the senior officials of NTPC and BHEL, are likely to be finalised in the next few weeks, said BHEL's Chairman and Managing Director A K Puri