BHEL Tiruchi suppliers to invest Rs 150 crore

Around 450 suppliers in Tiruchi, catering to Bharat Heavy Electricals Limited (BHEL), are planning to invest Rs 150 crore in 2010-11, to cater to the public sector unit’s outsourced demand, which is expected to touch Rs 1,000 crore in 2009-10 and Rs 1,500 crore in 2010-11.

These units, which are taking up “conversion” jobs from BHEL Tiruchi, have not felt the pinch of the global meltdown, since they cater to the power sector. In 2008-09 BHEL had outsourced jobs worth Rs 700 crore to them. Significantly, they have also received orders from European customers, who have traditionally sourced from China.

 

“Between April and November we have given orders worth three lakh tonnes. This will be increased to 4.5 lakh tonnes worth Rs 1,000 crore and to six lakh tonnes in 2011-12,” said A V Krishnan, executive director at BHEL’s Tiruchy unit.

The current capacity of the 450 units is not enough to address BHEL Tiruchi’s requirements, he added. The company has added 52 vendors across Madhya Pradesh, Kanpur, Pune, Nagpur, Kolkata, Durgapur and Raigarh in 2009-10.

“Currently we have 502 vendors all put together, but this will not be enough to meet our requirements. I have asked these units to adopt a cluster approach, whereby two or three units come together and join hands to supply BHEL,” said Krishnan, who wants 30 per cent of BHEL Tiruchi sub-contractors to have a capacity of 500 tonne-plus. Only three contractors currently have such capacity, while the rest have capacities of only 60-70 tonne.

To address the capacity issue, Krishnan said BHEL Tiruchi was looking to make use of 70-80 subcontractors from Andhra Pradesh who had written to it, saying that they are ready to take up jobs of up to 15,000 tonnes. “They don’t face power cuts, transportation is not an issue, and they are also ready to match our price,” said Krishnan.

Rajkumar Rajappa, president of the BHEL Small and Medium Industries Association (BHELSIA), said that in the last 12 months, units here have spent Rs 200-250 crore on imported machines to automate the welding of boiler support structures and to increase capacity. He noted that the number of units catering to BHEL doubled in the last two years. Next year around Rs 150 crore will be invested in similar activities.

“Our business grew by 25-30 per cent year on year, and we are bullish that this will continue over the next five years,” said Rajappa. These units take up fabrication jobs for BHEL Tiruchi, which produces boilers for power projects.

Rajappa added that the biggest challenges would be the availability of land for expansion and infrastructure, mainly power. “None of the five industrial estates where these units are operating are able to expand their facilities due to non-availability of land and power cuts for two hours a day, forcing each estate to spend about Rs one crore every month,” he said.

The association has approached the government to set up a special economic zone. “This will help us not only expand our capacity to cater to BHEL and other domestic customers but also take on export orders. We are getting good export enquiries, but are unable to take on orders due to capacity and power constraints,” said Rajappa.

He noted that a UK-based company has signed an agreement with Baby Industry, GB Industries and Hi-tech Engineering in Tiruchi. The British company traditionally sourced from China. “They have asked representatives of these units to visit China to look at the facilities.”

Labour availability and labour management are also a problem. BHEL’s suppliers are currently working one shift on the ground that there are power and labour shortages, but Krishnan believes they need to work more shifts.

Every year 250 welders pass out of ITIs and other institutes in Tiruchi, but BHEL does not know where they are absorbed (the company itself also trains around 300 people every year). It is estimated that these 450 units employ around 18,000 people directly and 12,000-14,000 indirectly.

To ensure more transparency, said Krishnan, BHEL Tiruchi has introduced a B2B system, through which it has brought all vendors under a single network. This would help BHEL monitor the order flow in these units.