Broke HAL borrows Rs 1,000 crore to pay salaries to employees

Broke HAL borrows Rs 1,000 crore to pay salaries to employees

BENGALURU: Defence PSU Hindustan Aeronautics Limited (HAL), grappling with low finances has been, for the first time in many years, forced to borrow money to pay salaries to its employees. The company is worried of work coming to a standstill from April with no money to make fresh purchases or even pay vendors.

TOI had reported first in its October 10 edition that HAL had cash only to pay its 29,000-strong salaries for just three months as the cash in hand was just about Rs 1,000 crore.

Late on Thursday, HAL CMD R Madhavan told TOI: “Our cash in hand is in the negative, we’ve had to borrow close to Rs 1,000 crore as an overdraft (OD). By March 31 we’ll have minus of Rs 6,000 crore, which becomes unsustainable. We can borrow for day-to-day work, but not for project purchases.”

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HAL is working on getting its OD limit extended from the present Rs 1,950 crore. The major reason for the troubles is dues owed by its largest customer, Indian Air Force (IAF), which hasn’t paid up since September 2017. In October, the outstanding dues, or receivables, was about Rs 10,000 crore.

As of December 31, dues are Rs 15,700 crore, and Madhavan said it would touch Rs 20,000 crore by March 31. The Ministry of Defence (MoD) had approved a budget of Rs 13,700 crore for 2017-18, and revised budget for 2018-19 was Rs 33,715 crore, including the pending amount from 2017-18.

“Of this, an allotment of Rs 20,287 crore came and balance in receivables was Rs 16,420 crore. As of today, pending dues are Rs 15,700 crore. And none of this is money we want as advance, it is for products and services we’ve delivered already,” Madhavan said.

Of the Rs 15,700 crore, about Rs 14,500 crore is due from IAF and the rest from the Indian army, navy and the coast guard. The IAF has paid only Rs 2,000 crore since September 2017. It’s present dues stand at Rs 14,500 crore.

HAL’s business is dependent on MoD, which has to allot budget to the armed forces, which in turn pay HAL for the business. “We’ve always been cash rich, this is the first time ever, or at least in the past two to three decades that we’ve borrowed money,” Madhavan said.

IAF Fleet To Suffer

Data from 2003-04 to 2017-18 shows that HAL’s cash balance has never been this low. The lowest was Rs 4,841 crore, in 2003-04. The balance as of March 31, 2018, was Rs 6,524 crore, which then touched Rs 1,000 crore as of September 30, and the PSU is left with no cash in hand as of December 31, 2018.

In a month, HAL spends about Rs 1,300 crore to Rs 1,400 crore on procurement and salaries. Of this Rs 358 crore goes for salaries and the rest for procurement.

“Every month this keeps adding up we’ll get into trouble. Slowly purchase orders will not materialise and projects won’t move forward. This year we will be able to manage because of the past purchases. From April, purchases that are due won’t come, affecting repair and overhaul (ROH) work, which will come to a standstill from April,” Madhavan said.

Repair and overhaul business fetches HAL about Rs 6,000 crore annually, and a majority of it is servicing aircraft of the IAF, which largely has ageing squadrons.

On the impact it has on HAL’s vendors, Madhavan said: “This is another big issue. There are more than 2,000 vendors dependant on us, all of them are MSMEs. My worry is that shortage of money will force us to keep dues, which will affect them badly. So far, we’ve managed to keep paying them.”

He said that all projects, including serviceability of aircraft, design projects such as LUH, LCH, will be affected. The firm, as TOI had reported earlier, is also staring at a depleting order book, which means it cannot rely on any advances from customers too.

 

Source:- timesofindia

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