The delays in the budgetary allocations are affecting the financial management of Hindustan Aeronautical Limited (HAL).
The Times of India reported that it has, as of October 9, only around Rs 1,000 crore cash in hand which is enough for the salaries of 29,035 employees for the next three months.
The reason for the crippling conditions of the HAL's finance can be attributed to multiple reasons. In the current year's budget, the PSU was allocated Rs 10,000 crore for 2018-19 but till date, the central government has disbursed only 40 percent of the allocated fund.
The funds are also being delayed by the Indian Air Force (IAF) which is the main customer of the HAL. The data from 2003-04 to 2017-18 reflects the cash level at the present level is lowest since 2004.
The development has come as a shock as the government had argued that HAL was already occupied with multiple projects. It was just because of this very reason Reliance Defence was selected as the offset partner of the Dassault Aviation to manufacture Rafale fighter aircraft in India.
In 2003-04, the company's cash in hand was the lowest at Rs 4,841 crore. As of March 31, the balance was Rs 6,524 crore. There was a substantial reduction in the reserves of the HAL as it carried out to buy back twice in recent times; once in 2015-16, of Rs 4,284 crore, and another in December 2017.
The latest annual report of the company shows that the annual remunerations for its employees stand at Rs 4,300 crore which means it sets apart Rs 358 crore every month for its workforce. This suggests that it has a balance to pay for the salaries of its employees for less than three months only.
One of the sources told the Times of India that "If the budgetary allocation comes through, the cash problem will be temporary. But in case there is further delay, the company will be forced to borrow cash to pay salaries."