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New Delhi: Heavy industries minister Praful Patel wants the Prime Minister to stop the railways from building two electrical equipment factories on concern the units will curb the transporter’s purchases from state-owned Bharat Heavy Electricals Ltd (Bhel).

Sluggish demand: Heavy industries minister Praful Patel. By Pradeep Gaur/Mint

“While there has already been a considerable reduction in sourcing of electrics from Bhel due to the technological changes at Indian Railways, with the setting up of above facilities, there would be practically no sourcing of electrics from Bhel, which may result in huge dedicated facilities becoming idle," Patel said in the 19 April letter to Roy.

Repeated phone calls to Patel did not elicit any response. Bhel declined to offer any comment.

“Since Bhel has already made considerable investments for the dedicated facilities for railways and also holds domain knowledge to manufacture these electrics, I request you to consider sourcing of the electrics from Bhel rather than going in for duplication of facilities," Patel wrote to Roy. “This would be in the mutual interest of both Indian Railways and Bhel."

Both railway projects have been formally approved by Parliament.

The rail ministry is in the process of preparing a reply to Patel, said a top official directly involved with the matter.

“We believe that the new facilities will not impact Bhel’s assured offtake and that is what we will convey to DHI (department of heavy industries) through our letter," said the official on condition of anonymity. “The new units will cater to the incremental demands of the railways and not existing demands."

The rail ministry is likely to send its reply within a week, said this official.

With the railways moving to alternating current (AC) technology from direct current (DC) technology, the product mix has undergone a considerable change. Most of the AC equipment is being purchased from original equipment manufacturers (OEMs).

“This has resulted in under utilization of the dedicated facilities created by Bhel," Patel wrote in the letter.

Patel’s move comes after Bhel chairman B.P. Rao said the drying up of equipment orders from power projects is forcing the company to tap new growth avenues such as rail, oil and gas and defence, as Mint reported on 3 April.

The power equipment maker’s order book fell to 22,096 crore last year from 60,000 crore in the previous fiscal because of sluggish power sector demand.

In the March rail budget, then minister Dinesh Trivedi announced a unit to make parts for high-horse power diesel locomotives at Vidisha and another to make next-generation propulsion systems in high-power electric locomotives at Shyam Nagar. Bhel has dedicated facilities for such supplies at its Bhopal, Jhansi and Bangalore plants.

Patel said in his letter to Singh that there hasn’t been much progress on Bhel’s earlier approach to the railways regarding an offer of partnership in other railway units.

The rail ministry had indicated its interest in considering such a partnership in a 30 August, 2011 letter.

This pertained to factories at Kanchrapara, for an electric multiple unit (EMU) plant, and Dankuni, for an electric locomotive assembly unit.

Both Kanchrapara and Dankuni are in West Bengal.

“Bhel, in return, conveyed its in-principle acceptance," Patel said in the letter. “However, the matter has not moved forward since then."

amrit.r@livemint.com

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