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Feb 17, 2014, 07.41 PM IST | Source: PTI

CAG pulls up BHEL for delays in capacity addition

CAG Audit report examined the adequacy and results of efforts of BHEL from conceptualisation to execution of manufacturing capacity expansion and its utilisation during 2007-12.

Government auditor CAG today pulled up state-owned  BHEL for delays in augmenting the equipment manufacturing capacity, needed for supporting the expansion of power sector.

"While CEA (Central Electricity Authority) identified power generation capacity addition requirements of 67,439 MW for XIth plan period (2007-12) in the country in November 2003 itself, BHEL completed the first phase of its capacity addition programme in March 2011," Comptroller and Auditor General of India said in its report tabled in Parliament.

Thus, the manufacturing capacity expansion, which was required to be planned and completed in the initial years of the XIth plan was declared to have been completed by BHEL only towards the end of the plan, it said.

"Implementation of the capacity expansion programmes for the XI and XIIth Plans disclosed delays between seven months and 62 months in 17 selected schemes out of 22 schemes approved in 2007-12," CAG said in the report.

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In addition to some uncontrollable factors, it said, delays due to reasons like non-fixation of targets for vendors to erect and commission machines, replacement of damaged equipment and delays in pre-ordering activities could have been minimised through improvements in market research, planning and monitoring.

"Existing installed manufacturing capacity for turbines, generators and boilers during 2007-11 remained largely under utilised," the report added.

There was considerable scope for improved utilisation. Though capacity utilisation picked up during 2011-12, there is a need to maintain and further improve it in order to achieve the benefits of ongoing capacity augmentation.

Further, audit observed delay in delivery of equipments ranging between 7 and 68 months in 126 out of 151 sets delivered by BHEL to its customers during 2007-12.

CAG Audit report examined the adequacy and results of efforts of BHEL from conceptualisation to execution of manufacturing capacity expansion and its utilisation during 2007-12. 

The CAG report said: "Apart from the need for better preparedness, capacity augmentation in different segment was also required to match plan requirements.

"Against the projected requirements of 8,200 MW and 31,860 MW for the country in supercritical (energy efficient) thermal segment during XI and XII plans, the capacity augmentation planned by BHEL was only 5,280 MW and 18,000 MW respectively."

CAG also recommended that the Ministry of Heavy Industries and Public Enterprises consider reviewing performance parameters and fix challenging targets in MoU to provide a more realistic and objective basis for assessment of performance of BHEL.

It said that BHEL may review the pricing mechanism of its equipment to make it more competitive by adopting appropriate costs including employee costs.

BHEL may work out a time bound programme for increasing outlays on R&D (research and development) activities, particularly in core areas so as to convert these into advantages in competition, it said.

CAG added that the monitoring mechanism in BHEL may be strengthened to minimise controllable delays in project execution and delivery by fixing periodicity and levels of monitoring up to the Board of Directors.

BHEL stock price

On November 21, 2014, Bharat Heavy Electricals closed at Rs 252.75, up Rs 7.35, or 3.00 percent. The 52-week high of the share was Rs 291.50 and the 52-week low was Rs 135.90.


The company's trailing 12-month (TTM) EPS was at Rs 11.68 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 21.64. The latest book value of the company is Rs 135.02 per share. At current value, the price-to-book value of the company is 1.87.

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