With `2,000 cr dues pending, Bhel halts supply to projects
State-run
firm regulating supply of equipment, services to companies including Abhijeet Infra, Visa Power
New Delhi: With outstanding payments mounting to more than 2,000 crore, state-run Bharat Heavy Electricals Ltd (Bhel) has stopped supply of equipment and services to forthcoming projects of companies such as the Abhijeet Group and the Adhunik Group.
In addition, India’s largest power generation equipment manufacturer has also been regulating supplies to projects of other companies such as Visa Power Ltd and Indiabulls Power Ltd, said several Bhel executives aware of the development.
Abhijeet Infrastructure Ltd, Adhunik Thermal Energy Ltd and Visa Power were named in the Comptroller and Auditor General of India report on allocation of coal blocks last year. The Central Bureau of Investigation has also charged Jas Infrastructure and Power Ltd, a subsidiary of the Abhijeet Group, JLD Yavatmal Energy Ltd and AMR Iron and Steel Pvt. Ltd in cases related to the allocations.
“There are around six chronic cases. Of these, the Abhijeet Group is a habitual one. We have stopped all supplies to them," said a top Bhel executive requesting anonymity. The group is at the centre of the controversy over alleged irregularities in the allotment of coal blocks and owes at least ₹ 600 crore to Bhel.
Abhijeet Power had placed orders for the Chandwa power project (1,080 megawatts, or MW) in Latehar, Jharkhand, and one in Vishakhapatnam (300MW) with Bhel. Visa Power had placed an order valued at around ₹ 2,665 crore for its 1,200MW project at Chhattisgarh, while Adhunik had placed one worth ₹ 1,400 crore for a 540MW project. Indiabulls has placed an order for 5,400MW of generating capacity with Bhel for two phases of 2,700MW each.
Power project developers have been struggling with interlinked issues such as fuel shortage, delays in signing fuel supply agreements (FSAs), lack of long-term power purchase agreements (PPAs) and a credit crunch.
“Abhijeet Group is facing funding issues due to their involvement in the coal scam. While not much work has happened on the Vizag project, a significant amount of work has been done on the Chandwa project. We have stopped supplies of equipment and services as they stopped payment," said a second executive at the country’s largest capital goods maker, requesting anonymity.
Bhel’s move comes in the backdrop of concerns about falling order inflows.
“Wherever payments are not coming, we are stopping material supplies and services. The projects are reviewed every week or 10 days. We are taking all sorts of action to recover the dues, from going slow on the projects to stopping total work on the sites," added a third Bhel executive, who also didn’t want to be identified.
After several quarters of tepid performance, Bhel’s December quarter’s net sales contracted for the first time in a decade. It fell 4.74% from a year ago to ₹ 10,041.65 crore, mirroring a slowdown in fresh orders and the slow pace of execution. A fall in fresh orders led to a 22.4% year-on-year decline in the order book to about ₹ 1.13 trillion.
“There are three types of customers: slow-paying, non-paying and paying. Abhijeet Group is the non-paying type as they are facing financing issues. We have stopped both erection and supplies to them a few months back. Work at Adhunik’s project has also stopped," said a fourth Bhel executive, who also didn’t want to be identified.
“We have also been regulating supplies to projects of Visa Power and Indiabulls," the executive added.
An Abhijeet Group spokesperson said in an emailed response, “We have placed an order of about ₹ 3,000 crore for supply of 1,080MW BTG (boiler turbine generator) contract to Bhel for Chandwa. There is an outstanding of ₹ 600 crore of which there has been a supply of goods totalling to ₹ 325 crore which is non-erectable and has been sent ahead of schedule by different units of Bhel. The same is being reconciled with Bhel and will be paid."
A Visa Power spokesperson declined to comment in response to queries. Regarding Bhel’s stoppage of equipment supplies and services to Adhunik Group’s Jamshedpur project in Jharkhand, a spokesperson said in an emailed response that the “information is not correct".
“The commercial operation of unit I (270MW) has already been achieved on 21 January 2013. Presently, commissioning activities of unit II (270MW) is going on and the synchronization of the unit is expected by end-March 2013," the spokesperson added.
While an Indiabulls spokesperson declined to comment on the issue, a senior company executive, requesting anonymity, said, “While the company has been shortlisted in case-I bids like the one floated by the Uttar Pradesh state electricity board, it has not yet signed the PPA. The company would want to undertake further capital expenditure only after being assured that the PPA would be signed."
“As a result of the PPAs being signed, letters of assurance of Coal India Ltd would then get converted into FSA. Till then, the company has requested Bhel to hold on to the supply of equipment for phase II," the executive said, adding, “The phase I is complete and the commercial production is expected within the fourth quarter of the current fiscal."
Bhel posted a 14% increase in net profit to ₹ 6,868 crore in the year ended 31 March from ₹ 6,011 crore in the previous year. Revenue rose nearly 14% to ₹ 49,301 crore from ₹ 43,337 crore.
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