INTERVIEW WITH BP RAO
‘Chinese power equipment is not up to the mark’
Surabhi

Posted: Thursday, Jun 02, 2011
: State-run power equipment maker BHEL had announced plans to a launch a follow-on public offer last week. In an interview with Surabhi, chairman and managing director BHEL BP Rao talks about the company’s plans in 2011-12 and how Chinese power producers will impact the domestic industry. Excerpts:

BHEL board has approved a 5 per cent disinvestment. What about plans of a follow-on public offer?

It is a government disinvestment for which we have given our consent. The board has also recommended a stock split to make it more tradeable in the market. We will process the stock split, but the disinvestment and its timeline will be up to the government. It is basically to help achieve the Rs 40,000 crore target. We don’t need any extra funds and so decided not to go in for a fresh issue of shares in the FPO.

How big a threat are Chinese equipment makers to domestic producers?

The Chinese have been in the market for the last seven-eight years. But as more and more plants with Chinese equipment are getting commissioned, it is being realised that their performance is not up to the mark. We have flagged the issue that domestic power plant manufactures have a disadvantage vis-a-vis any foreign player — not only the Chinese. The Arun Maira committee also acknowledged this and called for some protection, if not full protection. It has recommended a customs duty of 5 per cent and a CVD equal to the excise duty. Though the ministry of power accepted this in principle, there are still some issues about the timing of the notification.

Chinese banks are now providing easy loans to power producers. Is the government looking at more measures?

I think they are worried about the security issue — just like in telecom equipment. Chinese are also giving financing on easy terms. Reliance has signed an MoU with them I don’t know if any other company has gone ahead in that direction. We, along with other domestic industries like L&T have taken this up. The government has announced a standards of equipment policy to prevent inefficient equipment from coming into the country. But a power plant takes about four -five years to come up. So, how much of this policy will get implemented, is yet to be seen.

What about foraying into power production?

We have entered into joint ventures with state generation companies, where we offer up to 26 per cent equity and we are open to increase our stake wherever required. We have signed agreements with Karnataka, Tamil Nadu, Maharashtra and Madhya Pradesh and have committed about Rs 3,000 crore in these plants with a generation capacity of about 600 MW. Apart from this, we are also in talks with Andhra Pradesh, Gujarat, West Bengal and Orissa.