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PMO brokers peace between NTPC, BHEL

The joint venture between BHEL and NTPC is a move to pre-empt a war within the public sector in making power equipment, reports Samiran Saha.

business Updated: Sep 19, 2007 21:13 IST
Samiran Saha

An intervention from the Prime Minister's Office led to the formation of the joint venture (JV) between public sector giants Bharat Heavy Electricals and NTPC Ltd that came into being on September 11. The move was to pre-empt a war within the public sector in making power equipment.

Following the formation of the JV the two PSUs would now jointly bid for all engineering, procurement and construction projects in India and abroad.

Sources said the power ministry was keen on allowing power generation giant NTPC to venture into manufacturing of power generation equipment through a subsidiary which otherwise has been a monopoly for BHEL.

After a long exchange of correspondence that went back and forth between the power ministry, BHEL and the NTPC and the Prime Minister's Office, a middle path in form of the JV was found to be a viable option for the PSUs nearly at war.

BHEL has been in power equipment manufacturing and felt its monopoly being threatened and was thus opposed to NTPC's subsidiary.

However, NTPC said it was a logical case of backward integration. BHEL officials feel, unlike NTPC it has to compete globally for procuring orders in India and abroad, while NTPC has been the preferred PSU for power generation.

BHEL officials said the proposed NTPC subsidiary could threaten BHEL's position as the state-run market leader for power generation equipment. "We are not averse to competition, but there should be a level playing field for us as well," a BHEL official told Hindustan Times on condition of anonymity.

NTPC has been mandated to carry out capacity addition to the tune of 78,000 megawatts at an estimated cost Rs 10,00000 crores by 2012. "If you look at the quantum of business likely to be generated in the coming years how can you expect BHEL to keep away," the official said.

BHEL officials feel the joint venture between the two-public sector giants would help synergise the efficiencies of both the companies help them compete more effectively on the global turf.