BHEL boiler auxiliaries division cuts cost, raises profit

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SME Times News Bureau | 05 Apr, 2010
Strategic sourcing and value engineering in production have helped Bharat Heavy Electricals Ltd's (BHEL) boiler auxiliaries division at Ranipet near Chennai to cut cost substantially and increase profit.

"Between September - November 2009, the steel prices went down and we bought our annual requirement then. We sourced steel at Rs.26,000-Rs.28,000 per tonne. Our annual steel requirement is around 200,000 tonne. The current steel price ranges between Rs.36,000 - Rs.38,000 per tonne," A. Chandrababu, the unit's general manager, said on Monday.

According to him, the inventory carrying cost is not high as the company enjoys 60 days credit period. Further, the interest cost is lower than the steel prices.

Through value engineering, the division increased efficiency of its product while a reduction in the weight of its electro-static precipitators (ESP) resulted in savings in material costs, he said.

"In ESPs the reduction in material usage is between 3-5 percent and per boiler terms it will be around 500 tonne. In the case of air fans, the weight reduction will be around 20 tonne," Chandrababu said.

The unit thus logged a 119 percent increase in profit before tax (PBT) at Rs.571 crore in 2009-10 as against Rs.261 crore posted in the previous year.

Strategic sourcing, indigenisation of corrosion resistant plants, SS wires, gear box sets, reverse auctions, new vendors for bearings for air heaters, special fasteners, productivity improvement measures and other activities fetched the division a savings of Rs.164 crore last year, he said.

He claimed the BHEL boilers were not only competitive but cheaper by five percent compared to the Chinese equipments.

"A lot of power generation companies who had ordered Chinese equipments are coming back to us for their subsequent units," he added.

Chandrababu said the division was talking to a couple of overseas players to manufacture desalination plants and wind mills. It would invest around Rs.60 crore this year to expand capacity.

For the current fiscal, the division has fixed a turnover target of Rs.3,000 crore.