The technology transfer venture will see the Sheffield-based manufacturing giant share specialist engineering knowledge with BHEL.
Graham Honeyman, chief executive of Sheffield Forgemasters, said: 'The agreement will see us help build new steel making and forging facilities to manufacture forgings for hydro, nuclear and thermal power generation projects servicing India's domestic market. The Indian power generation market is currently an area that we do not operate in so this provides a unique opening for us.'
The business development deal will also generate funds from a technology transfer fee and also from the royalties of sales of the forgings.
BHEL is expected to register 30 per cent growth in the next three years on the back of a robust order book of £4.5bn. The company has a turnover of £4bn and currently manufactures forging equipment for the subcritical power plants at its Haridwar plant in Uttarakhand.