Govt approves shutting down of HMT tractor unit, pay employees' outstanding dues

Union Cabinet on Thursday approved closure of loss-making tractor division of HMT at Pinjore, while sanctioning Rs 718.72 crore for payment of outstanding salaries and other dues at the public sector entity.

PTI| Updated: Oct 27, 2016, 18:25 PM IST
Govt approves shutting down of HMT tractor unit, pay employees' outstanding dues

New Delhi: Union Cabinet on Thursday approved closure of loss-making tractor division of HMT at Pinjore, while sanctioning Rs 718.72 crore for payment of outstanding salaries and other dues at the public sector entity.

The Cabinet, chaired by Prime Minister Narendra Modi, also given its approval for transfer of select small parcels of HMT land at Bengaluru and Kochi to different government entities for their use in larger public interest.

"The Union Cabinet...Has approved the budgetary support to HMT Ltd for payment of outstanding salary / wages and other employee related dues.

"It also approved closure of HMT tractor division by offering attractive VRS/VSS at 2007 notional pay scales," an official release said.

The decision will have a financial implication (cash outgo) of Rs 718.72 crore for payment of outstanding salary, wages and statutory dues, VRS/VSS ex-gratia payments and clearing of tractor division's liabilities towards banks and creditors.

HMT was established at Bengaluru in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. It played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country.

The tractor division has been incurring losses continuously and is unable to pay the salaries and other statutory dues of its employees.

Its employees based at Pinjore have not been paid salary since July 2014 and other statutory dues are also pending since November 2013.

HMT tractor division was established in Pinjore, Haryana in 1971 to manufacture HMT Tractors.

"Performance of the company started to decline in the '90s, in the post liberalisation economic environment with rising costs, stiff competition from international players and availability of imported goods at cheaper rates," the release said, adding several efforts were made in past to arrest the declining trend but it could not succeed to turnaround.

HMTL's profit making tractor business was affected due to poor offtake, under-utilisation of capacity and working capital constraints, the release said.

"It was observed that continuation in tractor business with its insignificant market share in the sector may not be a financially viable and sustainable option for HMT Ltd and hence it would be prudent to close the tractor business, make an exit from this segment and focus on the core sector of machine tools," the government said.

The statutory dues are also pending for the employees of other Divisions of HMTL.

"In view of the deteriorating position of the company and hardship being faced by the employees due to non-payment of salary/wages and other retirement dues, it has been decided to close down the tractor division of HMT Ltd by offering attractive VRS/VSS to its employees and clearing all their dues," the release added.