The defence PSU is awaiting payments from the IAF, Army, Navy and Coast Guard and is in such a dire situation that work might come to a complete standstill by AprilNew Delhi: The finances of state-owned defence behemoth Hindustan Aeronautics Ltd (HAL) is in such a poor state that it had to borrow around Rs 1,000 crores to pay salaries to its employees. For the first time in many years, the defence public sector undertaking (PSU) is in such a dire situation that it is worried about work coming to a standstill from April as it will have no money to make fresh purchases or even pay vendors.
IAF hasn’t paid dues since Sept 2017
According to a report published in a national English daily, one of the major reasons for HAL’s monetary troubles are the dues owed by its largest customer, the Indian Air Force (IAF), which hasn’t paid up since September 2017. In October, the IAF’s total dues amounted to Rs 10,000 crores. A report that had come out in October last year had warned that HAL had just enough cash (Rs 1,000 crores) to pay its 29,000-strong employee base for three more months.
HAL’s Chairman and Managing Director (CMD), R Madhavan, was quoted as saying, “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 a minus of Rs 6,000 crore, which becomes unsustainable. We can borrow for day-to-day work, but not for project purchases.”
Army, Navy, Coast Guard also owe money to HAL
Currently, HAL is working on getting its overdraft limit extended from the present Rs 1,950 crores. As of December 31, the dues stood at Rs 15,700 crores and is set to touch Rs 20,000 crores by March 31.
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. Its present dues stand at Rs 14,500 crore.
2,000 MSMEs will also take a hit
The depleting cash reserve is especially a matter of concern because it will impact HAL’s vendors as well, most of which are micro, small and medium enterprises (MSMEs). According to Madhavan, at least 2,000 vendors are dependent on HAL. Since the PSU’s order book has also shrunk, it cannot rely on advances coming in from customers either.
PSU Watch is a business news brand of 27 Frames Communications LLP. It places the spotlight on PSUs, Governance, Bureaucracy, Defence and Public Policy as the sector traverses through a period of radical change.