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

BENGALURU: Cash-strapped defence PSU Hindustan Aeronautics Ltd (HAL) has been forced to borrow close to Rs 1,000 crore to pay salaries to its employees. The company is worried that work may come to a standstill in April as it does not have money to make fresh purchases or pay vendors.

The main reason for the shortfall is that HAL’s largest customer, Indian Air Force (IAF), has not paid its dues. The IAF has paid only Rs 2,000 crore since September 2017 and its current dues stand at Rs 14,500 crore.

“As of December 31, 2018, overall dues from the armed forces are Rs 15,700 crore. It will touch Rs 20,000 crore by March 31. All of this is for products and services we’ve already delivered,” HAL CMD R Madhavan told TOI late on Thursday.

“Our cash in hand is in the negative. We have taken an overdraft of close to Rs 1,000 crore. 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,” said Madhavan. HAL is working on getting its overdraft limit raised from the present Rs 1,950 crore.

TOI was the first to report on October 10, 2018 that HAL had cash reserves of about Rs 1,000 crore, just enough to pay its 29,000 employees for three months.

“We’ve always been cashrich. This is the first time in the past three decades that we’ve borrowed money,” Madhavan said.

HAL spends about Rs 1,400 crore a month, of which Rs 358 crore goes towards salaries and the rest for procurement.

“Every month, this keeps adding up. Slowly purchase orders will not materialise and projects won’t move forward. This year, we will be able to manage because of past purchases. From April, purchases that are due won’t come, bringing repair and overhaul work to a standstill,” Madhavan said.