HMC in dire straits; sends SOS to ministry

Islamabad

Ministry of Finance has rejected three official summaries forwarded by Industries Ministry for providing bailout package of Rs756 million to Heavy Mechanical Complex (HMC) on immediate basis as hundreds of its employees have been living without salaries for the last six months, The News has learnt.

Official summaries forwarded by Ministry of Industries & Production (MoIP) to Finance Division during last few months, copies of which are available with The News, state that the grim situation of HMC might lead closure of this leading institution of country’s engineering industry if it was not rescued from its current financial straits. “In the last forwarded summary, the MoIP has even proposed to allow internal adjustments as available resources within the ministries’ institution like National Fertilizer Corporation (NFC) and Pakistan Industrial Development Corporation (PIDC) can be diverted towards rescuing HMC from its existing financial morass,” one top official disclosed while talking to The News here on Thursday.

The first whistleblower regarding severe financial health of HMC was indicated by Chairman Board of Directors of HMC Lt Gen (R) Shahid Niaz through its official communication on December 28, 2015 that HMC had become insolvent and was unable to clear its current liabilities; rather it was on the verge of closure. The HMC management also informed the Board that they have no working capital to execute the orders in hand. Moreover, besides the operational matters, it was becoming difficult to maintain industrial peace due to non- payment of salaries for several months.

After that former Secretary Ministry of Industries Arif Azeem sent out summary for extension of loan to HMC by stating that this entity had made nominal profits during the last ten years but incurred losses in 2009 (Rs286 million) and 2015 (Rs1.1 billion) and liabilities stand presently at Rs3.9 billion.

The MoIP further states in its summary that HMC has orders of Rs0.8 billion in hand and has been awarded two major power contracts worth around Rs3.8 billion. Moreover, with the recent change of management a more aggressive marketing strategy is now in place to procure additional orders from both the public as well as the private sector. On the other hand, HMC’s ability to complete these orders is severely constrained by financial crises. The company has been unable to pay salaries to its employees and other outstanding liabilities must be cleared to ensure its operation.

MoIP is of considered opinion that HMC should be provided interest free loan of Rs601 million (with repayment period of over seven years including a two-year grace period,) may be sanctioned on urgent basis. The Ministry of Finance would be requested separately to ask the National Bank of Pakistan to raise HMC’s fund based running finance facility from Rs150 million to Rs500 million.

The Ministry of Finance’s corporate finance wing through office memorandum replied in March 2016 that since no allocation has been made in budget for current financial year 2015-16 provision of interest free loan proposed by MoIP may not be possible. 

Again, the MoIP sent out another official summary to Finance Division on April 1, 2016 stating that Finance Division was requested to make arrangements for release of Rs585 million. HMC, being a strategic concern, needs this one-time support as soft loan from Finance Division or MoIP may be directed to meet immediate financial requirements of HMC through loan by NFC or PIDC, both under the administrative control of MoIP.

The Ministry of Finance in its official reply on April 5, 2016 showed its inability to meet demand of Rs585 million. 

Third time, the MoIP again sent out official communication to Finance Division stating that Finance Division was requested to give their views on alternate options to resolve financial difficulties being faced by the HMC. Till to date, MoIP received no official response from Ministry of Finance.

Now HMC requires financial support of Rs756 million as it requires Rs217 million for payment of six months’ salaries to its 600 permanent and contract employees, Rs78 million for payment of electricity and gas utilities for three months as the HMC witnessed electricity disconnection last week for half an hour from Iesco, payment to retired employees Rs122 million, arrears to employees salaries Rs30 million, L.C orders Rs37 million, Sales Tax Rs107 million and bills of suppliers and contractors Rs105 million.

When contacted a top official of Finance Division said that HMC should come up with viable business plan then the government could consider to support it on merit at an appropriate forum.

This correspondent also contacted with President of HMC’s Joint Employees Action Committee Murtaza Shah (who represents both officers and low grade technical and non-technical staff,) who said that they wrote letters to president, prime minister, finance minister, army chief and many other federal ministers to provide financial support to this institution otherwise it could adversely affect thousands of family members of HMC employees.