Equipment majors now increasingly banking on private sector contracts to bolster order books

Reflecting the increased play by the private sector in core sectors such as power and heavy engineering, equipment firms and turnkey contractors are increasingly banking on private sector contracts to bolster order books.

Firms such as Bharat Heavy Electricals Ltd and Larsen & Toubro, which were mostly running after Government tenders till a couple of years ago, are seeing a surge in order from private firms.

L&T, for instance, in 2010-11, won most projects from private players. Out of its Rs 79,800 crore- cumulative order inflow, 52 per cent is coming from private players against 26 per cent from the Government, including public sector undertakings.

In 2009-10, it was the other way around, with Government orders accounting for 59 per cent of the total order inflow of Rs 69,600 crore. The engineering major has now listed out the “Government's ability to fund infrastructure” among the challenges that it expects to face in the coming years.

For state-owned BHEL too, there has been a sharp surge in orders from private firms, coming amid an increase in the private sector's contribution to the overall power capacity addition effort in the country.

In 2009-10, BHEL had secured its highest-ever order book tally from private power utilities at Rs 33,787 crore – an over three-fold increase over the previous year and well over 80 per cent of the total orders booked by the company's power division.

Continuing the trend in 2010-11, in its utilities business, BHEL's private sector share was over 51 per cent. This would be even higher if its industry business segment was also taken into account, company officials said. All this at a time when it faces increasing competition from NTPC Ltd.

For Punj Lloyd, which recently bagged a Rs 114-crore contract from Uttar Pradesh Rajya Vidyut Utpadan Nigam for building a railway siding at the state-run utility's Anpara plant, this order was an exception to the general trend. The company has been consistently relying on a bigger share of private projects in India for several years now, even as it has focused on bagging Government projects abroad.

Chinese competition

Besides, even as a slowing economy poses new challenges for domestic infrastructure majors, Chinese firms have stepped up the competition and are making inroads in sectors such as power by cornering private sector orders. However, they have almost a zero score with Government utilities and are not making much effort to change that.