BHEL reduces capacity utilisation by 60-70%

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SummaryCash-strapped power equipment manufacturer Bharat Heavy Electricals Ltd (BHEL) has informed Prime Minister Manmohan Singh’s Office that it has reduced its capacity utilisation

Cash-strapped power equipment manufacturer Bharat Heavy Electricals Ltd (BHEL) has informed Prime Minister Manmohan Singh’s Office that it has reduced its capacity utilisation by 60-70 per cent as huge pending receivables, piling inventories and a drying order book has compounded its woes.

At a meeting convened by Singh’s principal secretary Pulok Chatterji on November 23, BHEL CMD BP Rao said with cash reserves depleting, his PSU is facing cash flow issues owing to lack of fresh orders from the power sector.

“In fact, BHEL is very tight for cash and capacity utilisation may go down drastically in future if the power sector continues to be plagued with problems,” an official who attended the meeting quoted Rao as saying. The CMD also told Chatterji that with the banks not forthcoming to electricity generation sector, the producers are becoming cautious, which has possibly led to BHEL’s order book drying up. He said BHEL’s capacity utilisation is already down by 60-70 per cent.

The cash-strapped PSU has till recently been forced to deliberately withhold dispatches of finished equipment to some of its buyers during the last quarter ostensibly to exert pressure on them to make payments. Although the move yielded some dividends for the company, but it is also a worrying indication of the navratna company’s financial strength. Its problems have multiplied as power generating companies and firms producing cement and steel are understood to be going slow on their projects.

BHEL’s net profit for the second quarter of the current financial year was nearly 10 percent down at Rs 1,274.45 crore as against Rs 1,412.03 crore in the same quarter last financial year. The PSU had said its income from operations in the July-September quarter grew marginally by 2 percent at Rs 11,009.28 crore, from Rs 10,758.08 crore in the same period last fiscal. So far BHEL along with private power equipment manufacturers like Larsen and Toubro and others are understood to have lost over Rs 65,000 crore worth orders to Chinese companies which led the government to consider enforcing a levy on import of equipment for mega power plants.

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