The Union cabinet on Thursday approved closure of loss-making tractor division of HMT at Pinjore, near Chandigarh, while sanctioning Rs 718.72 crore for payment of outstanding salaries and other dues at the public sector entity.
The cabinet, chaired by Prime Minister Narendra Modi, also given its approval for transfer of select small parcels of HMT land at Bengaluru and Kochi to different government entities for their use in larger public interest.
“The Union Cabinet...has approved the budgetary support to HMT Ltd 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,” an official release said.
The decision 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 banks and creditors.
HMT was established at Bengaluru in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. It played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country.
The tractor division has been incurring losses continuously and is unable to pay the salaries and other statutory dues of its employees. Its employees based at Pinjore have not been paid salary since July 2014 and other statutory dues are also pending since November 2013.
HMT tractor division was established in Pinjore, Haryana, in 1971.
“Performance of the company started to decline in the 1990s, in the post-liberalisation economic environment with rising costs, stiff competition from international players and availability of imported goods at cheaper rates,” the release said, adding several efforts were made in past to arrest the declining trend but it could not succeed to turnaround.