Cabinet approves Budgetary support to HMT for payment of outstanding salary, introduction of VRS/VSS and closure of operations of Tractor Division

Transfer of land to Government entities also approved

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has approved the budgetary support to HMT 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.

It 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 Bank, creditors etc.

The Cabinet has also given its approval for transfer of selected small parcels of HMT land at Banglore and Kochi to different Government entities for their use in larger public interest.

Background:

HMT, a Central Public Sector Enterprise under the Ministry of Heavy Industries and Public Enterprises of the Government of India was established at Bangalore in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. HMT played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country. 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. Several efforts were made in past to arrest the declining trend but it could not succeed to turn around. HMTL's profit making tractor business was affected due to poor off-take, under-utilisation of capacity and working capital constraints, etc. 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 Tractor Division has been incurring losses continuously and is unable to pay the salaries and other statutory dues of its employees. The employees of Tractor Division based at Pinjore have not been paid salary since July, 2014 and other statutory dues are also pending since Nov., 2013. The statutory dues (Terminal benefits, PF, Gratuity, Leave encashment etc.) are also pending for the employees of other Divisions of HMTL [Corporate Head Office(CHO), Common Service Division(CSD) and Food Processing Machinery unit, Aurangabad (FPA)]. 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.

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