BHEL's market share set to fall below 55%

The market share of Bharat Heavy Electricals Ltd (BHEL), India's largest power equipment manufacturer, is set to decline to less than 55 per cent in the Eleventh Five Year Plan compared with over 70 per cent in the previous Plan.

This is despite the government's plan to make local manufacturing a pre-condition for supplying power equipment in the country as the provision would be applicable only on new orders. Orders for over 90 per cent of the 78,577-Mw capacity targeted for the Eleventh Five Year Plan (2007-2012) have already been placed.

Chinese, Korean, Japanese and Russian companies have been steadily eating into BHEL's market share. 
 

MAIN EQUIPMENT SUPPLIERS IN 2008-09
Companies	Capacity (Mw)
BHEL	5,595
Dongfang Electric	600
Shanghai Electric	600
L&T Consortium	445
Alstom	464
Power M/C Russia and Doosan, Korea	660
Voith-Siemens &Vatech	450
Fuji Electricals, Japan	250
CMEC, China	117

Analysts had been flagging off concerns over BHEL's declining market share and some had even predicted it to fall to 45 per cent in a few years given the cost competitiveness of imported equipment.

The government's pre-condition of domestic manufacturing is likely to allow BHEL to claw back market share from overseas companies, but only in the Twelfth Plan.

"The government's policies will move to absolute insistence on domestic manufacturing," Minister of State for Power Jairam Ramesh said.

The Confederation of Indian Industry (CII) has been lobbying for making domestic manufacturing mandatory for overseas equipment firms. It is now hopeful that the conditionality of domestic manufacturing will not be limited to orders from state-owned utilities, but would also apply to private sector companies.

"The Chinese equipment suppliers win bids through tenders but there is the question of availability of spares and parts," said CII's Sarita Nagpal, head, manufacturing.

In the current fiscal, only about 50 per cent of the orders for the targeted capacity addition of 11,061 Mw have been placed on BHEL, according to data from the power ministry.

In addition, the Siemens-BHEL consortium has bagged orders for another 11 per cent. The rest of the orders have been bagged by Dongfang Electric, Shanghai Electric, Alstom, Doosan, CMEC and FUJI Electricals.

BHEL, however, accounts for about 64 per cent of the country's overall installed capacity of about 135,000 Mw.

BHEL, with an annual capacity of 10,000 Mw, has been struggling with a backlog of orders.

Officials said it was in the process of expanding capacity to 15,000 Mw by 2009-end.

"BHEL will have a manufacturing capacity of 56,000 Mw in the Eleventh Plan while orders are likely to be limited to about 44,000 Mw," said a senior official of the company.

BHEL has, therefore, suggested that orders for the projects earmarked for the Twelfth Plan be placed in the last two years of the current Plan to enable better manufacturing capacity utilisation.

It's shares closed at Rs 1,765.25 at the Bombay Stock Exchange (BSE) on Thursday, down Rs 11.50 from the pervious day's close.