Cash Position Expected to Improve: HAL On Financial Crisis Reports

Reports claimed that HAL has been forced to borrow money to pay its employees – a first for them in many years.

3 min read
The HAL office in Bengaluru. 

Amid reports of financial crisis, Hindustan Aeronautics Limited (HAL) on Sunday, 6 January, clarified that its “finances are expected to improve,” PTI reported. HAL talked about orders for 83 light combat aircraft and 15 light combat helicopters that were in advanced stages.

A report on The Times of India on 5 January claimed that HAL has been forced to borrow money to pay its employees – a first for them in many years.

“In view of the various media reports on HAL, following is clarified: HAL has taken overdraft of Rs 962 crores. With anticipated collection up to March, the cash position is expected to improve. Orders for LCA Mk1 A (83) & LCH (15) are in advanced stages”, HAL said on Twitter.

HAL’s Reserves Touch Lowest Ever

The Times of India report had speculated that the major reason for the financial strain was caused by pending dues owed by the Indian Air Force, its largest customer. The armed forces has paid only 2,000 crores since September 2017 taking the outstanding dues to about 14,500 crores.

The Ministry of Defence (MoD) had approved a budget of Rs 13,500 crore for 2017-18 and a revised budget at 33, 715 crore, including the pending amount from 2017-18.

As of 31 December, its dues have touched 15,700 crores, which will touch 20,000 crores, the HAL chairman stated. Reportedly, of the Rs 15,700 crores due, about Rs 14,500 crore is due from IAF and the rest from the Indian army, navy and the coast guard.

Broke State to Hurt 2K MSMEs

The financial strain is set to impact multiple stakeholders, including its 2,000 MSME vendors, TOI reported earlier report added.

Speaking to the daily, HAL Chairperson R Madhavan had said “My worry is that shortage of money will force us to keep dues, which will affect them badly. So far, we have managed to keep paying them.”

Besides, all projects such as design projects such as LUH,LCH and serviceability of aircraft will be largely affected. Adding to its woes are depleting order books that leaves the PSU no scope to rely on customers, TOI reported.

‘Always Been Cash-Rich, But Now Reserves in Negative’: HAL Chairman

HAL’s business is dependent on the Ministry of Defence which allots budget to the armed forces and in turn pays to the PSU for business, the daily reported.

Our cash in hand is negative, we have had to borrow close to 1,000 crore as an overdraft. By March, we will have minus of 6,000 crore, which becomes unsustainable. We can borrow for day-to-day work, but not for project purposes. 
R Madhavan, HAL Chairman to TOI

Reportedly, HAL is now working on getting its overdraft limit increased from the present cap of 1,950 crores.

War of Words Breaks Between Cong & BJP Over HAL

With HAL's tweet amid reports on its financial position, a war of words broke out between between the Congress and the BJP.

Congress President Rahul Gandhi alleged that Defence Minister Nirmala Sitharaman "lied" in Parliament that government orders worth Rs 1 lakh crore were provided to the HAL. He demanded she either place the documents in support of her statement in the House, or resign.

Responding to that, Sitharaman's office tweeted that he should "start from ABCs" and read the complete report before commenting on it.

"It's a shame that the president of @INCIndia is misleading the nation. HAL has signed contracts worth Rs 26570.8 Cr (Between 2014 and 2018) and contracts worth Rs 73000 Cr are in the pipeline. Will @RahulGandhi apologise to the country from the floor of the house?," Sitharaman tweeted from the defence minister's official handle.

(With inputs from The Times of India)

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