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Bhel plans to make transformers in Kenya

10/20/2010 Step-up-transformer-marketing

State-run power equipment maker Bharat Heavy Electricals Ltd (Bhel) plans to set up a transformer manufacturing plant in Kenya in a joint venture with the Kenyan government, as part of India’s growing engagement with Africa.

In addition, India has also offered to help Kenya put in place a standards and labelling programme for electrical equipment and an energy conservation building code.

At the recent sixth meeting of the joint trade committee (JTC) in Nairobi, India also proposed developing port, airport, road and railway infrastructure in Kenya by state-owned Rail India Technical and Economic Services (RITES), a subsidiary of Indian Railways.

“East Africa has been the gateway to Africa,” commerce minister Anand Sharma, who attended the meeting, told reporters in Nairobi on Thursday at the Namaskaar Africa initiative by the Federation of Indian Chambers of Commerce and Industry (Ficci), an industry lobby.

Kenya, along with Tanzania, Burundi, Uganda and Rwanda, is part of the East African Community (EAC).

Bhel is seeking a joint venture in equipment manufacturing to help it control costs while bidding for projects in the region. A plant located in Kenya will help it service markets in Africa, which is facing a chronic power shortage.

“We have proposed this facility to them and are now waiting for them to revert,” said a senior Bhel executive, who did not want to be identified. The Kenyan government-owned Numerical Machining Complex Ltd has also sought a strategic partner from among Indian heavy machinery manufacturers.

According to the minutes of the JTC reviewed by Mint, Bhel is also interested in setting up thermal, solar and hydropower generation projects. It is keen to supply drilling rigs, wellheads and other equipment for the petroleum sector.

Bhel is present in 17 countries in Africa. Primary international markets for the company, which plans to raise export orders to Rs.10,300 crore by 2012, are West Asia, Africa and Central Asia. While Africa is estimated to have around 10% of the world’s oil reserves, it faces a chronic power shortage. Bhel won export orders worth Rs.3,571 crore in the last fiscal and is hopeful of securing orders worth Rs.5,000 crore in the current fiscal.

Bhel’s focus on exports stems from a concern that its market share in India may decline to a projected 50%, from the current 60%, in the next five years because of increasing competition from local and overseas companies. For the fiscal ended 31 March, Bhel had a net profit of Rs.4,287 crore on revenue of Rs.34,050 crore. According to the minutes of the Nairobi meeting, RITES has offered help in the development of cruise and cargo ship facilities, advisory services for privatization and concessioning of airports in the tourist areas of Masai Mara and south coast of Mombasa and development of the road sector. In addition, RITES has offered help in the development of a railway network.

India and Kenya have set up a target of increasing bilateral trade to $2.5 billion (Rs.11,100 crore) by 2012-13 from the current level of $1.5 billion.