Report No.29 of 2017 - Performance audit Union Government Competitiveness of BHEL in Emerging Markets Reports of Ministry of Heavy Industries and Public Enterprises

Overview

Audit Report No. 29 of 2017 is the Performance Audit Report on Competitiveness of BHEL in Emerging Market.

The Performance Audit was conducted with a view to examine the competitiveness of BHEL in emerging scenario of climate change, increased competition and squeezed delivery schedules with emergence of new competitors.

Audit covered marketing activities of three business sectorsviz. Power, Industry and International Operations of the Company, for the period 2012-13 to 2015-16 and execution activities from 2011-12 to 2015-16. All projects on hold as on 31 March 2016 were also covered.

As BHEL largely depended upon power sector for turnover and had not effectively diversified into new/less operated business areas, both turnover and profitability of the Company declined sharply with slowdown in power sector. BHEL’s turnover which was Rs.49510 crore in 2011-12 declined to Rs.26587 crore in 2015-16; while profits of Rs.7400 crore in 2011-12 turned into a loss of Rs.913 crore in 2015-16.BHEL had fixed Strategic Plan targets for the period 2012-17 with focus on diversification and innovation. However, BHEL did not set year wise milestones for implementation of the envisaged strategies.  BHEL could not achieve any of the strategic plan targets till 2015-16 and shortfall ranged between 23.33 and 113.91 per cent against specific goals.

BHEL could not bridge the technology gap in the core power sector. Costing data used by the manufacturing units/regional offices of BHEL for bidding was not reflective of actual position. There was no improvement in the performance of BHEL in project erection as per customer surveys carried out over the period 2012 to 2014.  BHEL could not complete any of the projects selected for performance audit within scheduled completion time.

BHEL supplied material to private developers without establishment of LC against contract provisions. Subsequently these projects weredeclared ‘on hold’ and outstanding dues of these projects accumulated to Rs.2660.77 crore.  Due to delay in carrying out Performance Guarantee tests and clearing punch points/pending works loss of interest on outstanding dues which could not be realised on account of such delays worked out to Rs.1457.11 crore.

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