BHEL to expand footprint in defence production market

Written by Subhash Narayan | HumaSiddiqui | New Delhi | Updated: Jan 30 2014, 10:13am hrs
Faced with falling order book and challenges in the power sector, state-owned power equipment manufacturer Bharat Heavy Electricals (BHEL) is looking at expanding its presence in the lucrative defence production market to rev up its revenues.

The company is planning to tie-up with the Defence Research and Development Organisation (DRDO) to indigenously develop field guns for the Indian Army, including a more modern and potent variant of the infamous 155 mm Bofors Howitzer guns.

In defence, our engagement can be bigger. We are in dialogue with DRDO to collaborate in the development of field guns. The company has already been nominated by the defence ministry for development of 127 mm guns for naval forces and now feels it can even go for production of bigger guns, Bhel chairman and managing director B Prasada Rao told FE.

The talk for field guns with DRDO is expected to be for joint development of 155 mm guns of different calibres. While the Ordnance Factory Board (OFB) is developing an upgraded indigenous version of the original Swedish 155 mm Bofors Howitzer, DRDO sources said BHEL could be offered space in a different version of the same gun with lower or higher calibre. Higher calibre in guns ensures longer firing range.

The army needs close to 2,500 of 155 mm guns over next 15-20 years to replace 400-odd Bofors guns that were bought way back in 1986 under a R1,500 crore deal with Sweden. The army has been without these guns ever since the Bofors gun deal and is now in urgent need of about 450 Howitzers.

The defence ministry has already put in place an artillery modernisaton, which is estimated to cost R35,000 crore. But long-term requirements of the armed forces could provide orders worth over R1.5 lakh crore to various domestic companies. Already, Tata Power Strategic Electronics Division, L&T and Bharat Forge are engaged in developing prototype of this gun so that they can get into production of these advanced guns after approval by the end user/army.

Apart from large sized 155 guns, BHEL also wants to participate with the defence ministry to manufacture smaller field guns of 30 mm size.

Our technology and manufacturing prowess ensures that we can simultaneously develop systems that meet the requirements of the defence forces. We already have a strong relationship with them and want to participate more actively in indigenisation programmes, Rao said.

BHEL is already supplying 76 mm guns to the navy and has also been nominated by the defence ministry for production of 127 guns for the navy. It is making motors for submarines and solar panels used by satellites as well.

What makes BHEL's case stronger for field guns is that OFB has not been able to produce a single gun withstanding field trials so far.

The defence ministrys procurement procedures have a Make category, which has been envisioned just for such projects. This allows participation from state-owned and private players in defence production programmes to bolster indigenisation.

Big ticket entry into defence production is part of a larger diversification drive by BHEL to insulate itself from problems in the power sector which accounts for 70% of its revenue.

BHEL's outstanding order book has fallen to the 1,05,000 crore level and new order bookings this year could be less than half of the targeted amount. Defence and transportation is therefore being expanded by the company.