Telangana powers BHEL with Rs 17,950-cr thermal plant deal

For the struggling capital goods sector, the creation of Telangana state is proving to be a bright spark in an otherwise lacklustre order inflows outlook. Public sector equipment major Bharat Heavy Electricals Ltd (BHEL) on Tuesday announced that it had bagged a Rs 17,950 crore order from the new state — the single-largest order in BHEL’s 51-year history and one of the biggest orders ever placed in the country’s capital goods sector — for setting up a new thermal power project in the state.

To put it in perspective, this single order is nearly 60 per cent of the company’s orders inflow (Rs 30,814 crore) recorded during the whole of the last fiscal (2014-15).

The order placed by the Telangana State Power Generation Corporation Ltd (TSGENCO) for setting up a new 4,000 MW supercritical thermal project comes on the back of two other big-ticket orders won by BHEL late last fiscal — to set up Telangana’s first supercritical thermal power plant of 800 MW rating at Kothagudem in December 2014, and an order for a 1080 MW thermal power station at Manuguru in Khammam district in March 2015.

The two orders were primarily responsible for a 10 per cent surge in BHEL’s order inflows last fiscal (topping Rs 30,000 crore as against a provisional estimate of Rs 21,000 crore made earlier in the year), even as private sector orders have dried up almost completely for the equipment firm.

“The project would be carried out on fast track basis with both BHEL and TSGENCO setting up teams to expedite clearances and speedy execution of the project. BHEL’s scope of work in the project includes design, engineering, manufacture, supply, construction, testing and commissioning of the 5×800 MW thermal sets on an EPC basis,” said a senior BHEL executive on the latest order.

It’s not just BHEL alone. Engineering firm Larsen & Toubro (L&T) got a boost with the K Chandrasekhar Rao government proposing an extension of the upcoming Hyderabad metro rail network at a detailed review meeting held last month. The 72-km-long elevated metro rail project is being executed by L&T under public, private partnership mode. The state government has allocated Rs 2,000 crore for road widening and land acquisition so far.

Also, in an effort to improve road connectivity in Telangana, the Centre is taking up as many as 26 new national highway projects covering a length of 920 km at a cost of Rs 6,400 crore. The Telangana government has also submitted a proposal to the Centre for setting up a dry port in the state.

In his budget presented in November 2014, Telangana Finance Minister Eatela Rajender had said the power-starved state would add 20,000 MW over the next five years and the road network would be strengthened by infusing Rs 10,000 crore over the next two years. The plan included double-laning of roads connecting mandal headquarters to district headquarters.

Even as the Union finance ministry has made out a case for considering the need to revive public investment as one of the key engines of growth, new projects of the scale and size that can offer an incremental push to the capital goods sector have been largely lacking. The steady stream of infrastructure orders from Telangana comes at a time when the core sector companies and capital goods firms have been struggling, with BHEL having reported its worst results in at least five years, with a sharp 24 per cent drop in turnover in its provisional numbers for 2014-15. L&T has been struggling too, with the company having cut its order book position twice this year already.