A HAL manufactured Hawk advanced trainer jet

In the current year’s budget, HAL was allocated Rs 10,000 crore for 2018-19, but so far, the central government has disbursed only 40 per cent

State-run Hindustan Aeronautics Ltd’s (HAL) cash in hand has shrunk to a paltry Rs 1,000-odd crore as of the end of October this year, primarily due to delayed release of its budgetary allocations. The cash level at present is the lowest since 2003-2004, when the defence firm’s cash in hand was Rs 4,841 crore. 

In the current year’s budget, HAL was allocated Rs 10,000 crore for 2018-19, but so far, the central government has disbursed only 40 per cent. As of March 31, 2018, the company’s cash and cash equivalents stood at around Rs 6,524.20 crore, having fallen from Rs 11,116.84 crore in the previous fiscal year. This figure had been as high as Rs 17,671.40 crore at the end of financial year 2014-15, before steadily falling. 

The substantial reduction in HAL’s reserves was primarily because of the two share buybacks it carried out in recent times — once in 2015-16 of Rs 4,284 crore, and another of Rs 921 crore in December 2017.

Interestingly, this level of cash balance is not enough to meet salaries of its 29,035-strong employees for three months. The latest annual report of the company shows that remunerations for its employees stand at Rs 4,300 crore per annum, which means it sets apart around Rs 358 crore every month for its workforce. 

It is learnt that if the budgetary allocation doesn’t come through or is delayed further, the company will be forced to borrow cash to pay salaries.

In an irony of sorts, the firm which is touted as the largest defence public sector unit (PSU) in terms of production value is also starved of orders. While it had announced a record turnover of over Rs. 18,000 crore in FY18, it expressed concern over fresh orders this year.

The only division of the aeronautics major which enjoys an effective monopoly in segment in India that has some business is the chopper division, which is presently working on orders for 73 Advanced Light helicopters and is awaiting more orders for its Light combat helicopter version. These concerns are also weighing on the company’s stock prices, with HAL scrips having lost more than a fifth of their value since its listing in March this year.

Defence Allocation

The Union Budget allocation in 2018-19 for the defence sector (excluding miscellaneous and defence pension) is Rs. 2.79 lakh crore with an increase of 7.7 per cent over the previous year’s allocation. However, defence expenditure allocation has come down to 1.49 per cent of GDP from allocation of 1.54 per cent of GDP in the previous year This is also the lowest percentage allocation since 2000-01. This is expected to have an impact on modernisation plans.