 "There has been no fresh recruitment at the Pinjore plant (pictured) since 1993")
Will HMT Tractors meet the same end as HMT Watches? Facing a severe funds crunch and manufacturing only 1,200 tractors a year against an installed capacity of 8,500, India's maiden indigenous tractor maker is racing against time.
The vertically integrated plant on 867 acres here on the scenic Himalayan Expressway is languishing due to bureaucratic hurdles. Established in 1971 in collaboration with Motokov of the erstwhile Czechoslovakia, HMT Tractors produced close to 20,000 tractors a year till the late 1990s. Now, India produces 625,000 tractors a year and HMT's market share has dwindled to 0.25 per cent.
HMT Tractors' decline set in when new players entered the market after liberalisation in the 1990s. The centralised decision making of a public sector undertaking could not keep pace with the private sector. The need to seek approval from the HMT headquarters at Bengaluru and a bloated hierarchy led to delayed deliveries.
"The business of machine tools is different from that of tractors. Orders for machine tools are placed with advance payments so the working capital requirement is low. It is opposite in the case of tractors. The executives at Pinjore could never convince headquarters about the need for working capital," said an HMT Tractors executive who did not wish to be named.
Induction of 250 employees from the Hyderabad and Srinagar plants added an extra burden in the late 1990s. There has been no recruitment since 1993. The average employee age at the Pinjore plant is 55 years.
A voluntary retirement scheme offered in 2002 weaned away the most talented engineers at HMT Tractors who moved on to greener pastures in rival companies.
C B Goel, one of the young engineers recruited by HMT in 1964 - the Pinjore plant produced only machine tools from 1963 to 1971- runs an automobile ancillary unit in Panchkula. "I was one of the 30 engineers who left HMT in the 1980s to become a supplier of components. When sales started wilting at HMT 10 years ago, most of the vendors switched to other automobile companies," he says.
"The quality of the HMT tractor is excellent but delayed payments and inconsistent demand for components makes the survival of small vendors difficult," he adds.
The acquisition of Punjab Tractors by Mahindra & Mahindra and the growth of Sonalika Tractors in the last decade provided a life support system to vendors but made things even more difficult for HMT Tractors.
Working without a salary for 18 months, the staff here are pinning their hopes on a recent communication by the ministry of heavy industries to the Haryana government. The Centre wants the state government to offer them a golden handshake in return for the land on which the plant is located. But, the state government already owns this land and has no incentive to fund the voluntary retirement scheme.
Abhimanyu, Haryana's industry minister, refused to comment on the state's role in revival but sources in the government said the 867 acres gifted to HMT by the Punjab government was owned by the Haryana government in revenue records. HMT has claimed land ownership rights, and a case is being fought in the Punjab and Haryana High Court for the past six years.
Most of the Rs 1,083-crore revival package provided to HMT Tractors in October 2013 went into cleaning up its balance sheet. An amount of Rs 200 crore earmarked for capital expenditure and Rs 50 crore for technology upgradation have not been released because these were subject to the condition of the plant producing 10,000 tractors in a year.
Working capital of Rs 91 crore was given piecemeal. If given as a lump sum, there could have been better planning and fund utilisation. HMT Pinjore is an integrated township with two schools, a hospital and 1,100 houses. It costs Rs 8 crore a month to keep the facilities going.
Given its infrastructure, HMT Tractors can reach break-even by making 750 tractors a month. It has old liabilities of Rs 300 crore and projected voluntary retirement expenses of Rs 600 crore.
"If the constraint of working capital is solved, HMT Tractors can beat the competition," says Mahinder Singh, president of the workers' union.
Industrial development in Haryana has remained skewed towards districts in the region surrounding Delhi. If HMT Tractors shuts down, this will aggravate the regional imbalance in the state.
HURDLE AFTER HURDLE
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The plant on 867 acres of land at Pinjore is languishing due to bureaucratic hurdles
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HMT Tractors' decline set in when new players entered the market after liberalisation in the 1990s
