CAG slams BHEL for poor planning

New Delhi: The Comptroller and Auditor General (CAG) on Tuesday slammed PSU heavyweight Bharat Heavy Electricals Limited (BHEL) for not diversifying its business, inadequate effort to increase competitiveness, and improper management of receivables leading to its troubles.

“Power sector continued to account for the bulk (76.46 to 80.83 per cent) of BHEL’s turnover during 2011-12 to 2015-16.  As BHEL had not effectively diversified into new/less operated business areas, both turnover and profitability declined sharply with slowdown in power sector,” said CAG. 

CAG said  BHEL’s turnover which was Rs 49,510 crore in 2011-12 declined to Rs 26,587 crore in 2015-16; while profits of Rs 7,400 crore in 2011-12 turned into a loss of Rs 913 crore in 2015-16.     

CAG also said that BHEL could not achieve any of its 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; in particular, circulating fluidized bed combustion, gas turbine, dry type transformers and 500 mva inter connecting transformers,” said the report. 

On inadequate efforts for increasing competitiveness, CAG said that the PSU could not secure any of the four tenders  finalised against competition during 2015-16. BHEL’s quoted prices in these tenders were 4.36 to 73.85 per cent higher than L1 prices, it said.

CAG said that rationalisation of manpower by PSU according to level of operation was essential to maintain margin, competitiveness and business growth as manpower constituted significant component of its expenses. 

“Despite slowdown in power sector since 2010-11 and dampening investment sentiments, BHEL inducted 9,346 employees in the calendar years 2011 and 2012 against retirement of 5,844 employees during this period. As a result, the percentage of employee cost to turnover increased consistently from 11.04 per cent in 2011-12 to 20.84 per cent in 2015-16,” said the report.