The company has also signed an agreement with AP Generation Corp. to set up a 125-MW integrated coal gasification combined-cycle power plant in the city of Vijayawada in Andhra Pradesh state.

BHEL senior official Ravi Kumar said BHPVL would be developed as a dedicated center for industrial boilers.

Junior Minister for Commerce and Power Jairam Ramesh welcomed the agreement for the power plant at Vijayawada. He said the power plant would employ clean-coal technology and would be a great step forward.

Finance Minister P. Chidambaram, who was also present at the announcement on Saturday, said it was a memorable day both for BHEL and BHPVL.

"The United Progressive Alliance government is committed to the revival of ailing state-owned companies and has so far revived 29 such companies during the past four years, incurring more than $2 billion," he said, adding that the BHPVL workers would work harder for the revival.

"There were significant similarities in the product mix and businesses of BHEL and BHPVL, and this has been the guiding factor for the takeover. The synergy would make the marriage a success, but hard work should be put in by both partners," Federal Minister for Heavy Industries Santhosh Mohan Dev said.