The Hindustan Aeronautics Limited (HAL) has for the first time borrowed funds to pay salaries to its employees. The state-owned defence PSU has been facing dwindling finances which might lead to its operations coming to a complete standstill later this year due to lack of funds to make fresh purchases or pay its vendors, reports suggest.
"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," HAL CMD R Madhavan told The Times of India.
This the first time in at least the past three decades that HAL had to borrow money, which has always been cash rich, Madhavan said. As of now, HAL is trying to get its overdraft limit extended from the current cap of Rs 1,950 crore, TOI said.
Data shows that the last low in HAL's cash balance was in 2003-04 when it had Rs 4,841 crore in hand. By the end of financial year 2017-18, the company had Rs 6,524 crore, which slipped to Rs 1,000 crore in September 2018, and was wiped out by the end of 2018, according to the daily.
By the end of the last year, outstanding dues payable to HAL from its clientele runs up to Rs 15,700 crore, the daily reported. The biggest defaulter to HAL is the Indian Air Force (IAF), which is yet to pay Rs 14,500 crore, whereas the rest of the dues are from the Indian army, navy and coast guard, the report said.
The Ministry of Defence allocates budgets to the defence forces, which then pay HAL with the funds they receive. The ministry had approved budget to the tune of Rs 13,700 crore for 2017-18, and revised budget of Rs 33,175 crore for 2018-19 including the pending amount for 2017-18.
HAL spends Rs 1,300-1,400 crore on procurement and salaries every month, out of which funds to the tune of Rs 358 crore are used for giving salaries. As opposed to this, HAL earns around Rs 6,000 crore every year from repair and overhaul work, which largely constitutes keeping IAF's age old fleet in shape, the report said.
"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 told TOI.
Troubles with HAL operations will affect around 2,000 vendors from the MSME sector which works with the defence PSU. Cash shortage or work stoppage at HAL will directly affect these vendors.
The debacle at HAL has come to light close on the heels of statement by Defence Minister Nirmala Sitharaman in Parliament where she said that efforts are being made to scale up the capacities of the state-owned firm.
Edited by Vivek Punj
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today