This man (from Tamil Nadu) ran a road-side restaurant in Karnataka successfully until parochial bigots threatened to kill him if he didn't close down his business. He did — it was a distress sale — and what did he do with the proceeds? He opened a fabrication shop near Tiruchi with hopes of getting jobs from the public sector power equipment major, BHEL. Since this new company — let's call it KGF — met the eligibility requirements, BHEL began placing orders on it.
This other man was a lender, who came into some money and also opened a fabrication facility near Tiruchi. Somebody asked him why. “My son-in-law is doing his engineering,” he said.
Of the 403 vendors that BHEL has for undertaking non-pressure part jobs, at least a hundred, including the above two, are sick. Most of these hundred odd units came into existence within the last five years. It helped that BHEL relaxed a rule that the promoter need not be technically qualified. BHEL's major problem today is what to do with them.
“I can't simply ask them to close shop and go away; after all, there are about 2,500 people working with them,” says Mr G. Ramakrishnan, General Manager in-charge of outsourcing with BHEL, Tiruchi.
BHEL Tiruchi, which manufactures boilers for thermal power plants, gets a lot of low-technology, non-critical work done at the ecosystem that has emerged around Tiruchi. Last year, it ‘loaded' 3,41,000 tonnes on its ancillaries. This year, it is budgeted to be 4,80,000 tonnes.
The public sector company has in its DNA to see ancillary development as part of its social responsibility. With the power sector booming, the Tiruchi unit is aflush with orders and consequently the ‘loading' on the ancillaries is also on the rise — hence the rise in the number of vendors. About five years back, there were about 250 vendors.
The ‘problem' vendors are all small which adds to the woes because BHEL could not afford to be seen as depriving the small guy of business. Only about 20 per cent of the outsourced loads go to these 100 vendors, but it takes disproportionately long time and effort to deal with them.
Sixteen of the 100 are women entrepreneurs, who have really come up the hard way, some of them having learnt hard tasks such as welding. Another 25 are micro units with varied backgrounds. One of them, for instance, is a man-power contractor. A few others are ex-employees of larger units. All these people wanted to be on their own.
BHEL even tried to ‘tier-ise' ancillaries, just as in the automotive sector, asking the smaller units to be suppliers to the larger ones, on whom BHEL would place orders for systems rather than individual components. It met with tremendous resistance, sometimes in the form of tears.
“The women entrepreneurs start crying,” says Mr Ramakrishnan. One of them even put out her bare forearms on the desk when told that she should consider becoming a sub-contractor to another fabricator. “See? I have pledged my gold bangles to raise money for my unit.” Her concern was what if the big-brother fabricator does not pay properly. With BHEL, there is no such problem.
For many others, it is the ‘respect' they get in the society out of being a BHEL supplier that matters most.
Nor has it been easy to train them into maturity. Try teaching a welder-turned-entrepreneur finance. “I don't know all that.”
Thus, there is in Tiruchi an ironical situation where even as BHEL continues to prosper and three-fourths of its vendors partake of the spoils, the other fourth continues to totter on the brink of closure.