india

Updated: Jan 10, 2019 07:44 IST

The defence ministry has sought additional funds from the finance ministry to meet its expenses in the current financial year and also pay, at least in part, Hindustan Aeronautics Limited (HAL) the dues that the Indian Air Force (IAF) owes it, government officials said on condition of anonymity.

In addition, the defence ministry has advised state-owned HAL to use its reserves, about Rs 12,000 crore, officials in the ministry said on condition of anonymity.

On Wednesday, defence minister Nirmala Sitharaman met HAL chairman and managing director R Madhavan in New Delhi.

“A company builds reserves for these very reasons,” a senior government official said.

In the meeting on Wednesday, the government and HAL also discussed delivery schedules of aircraft and helicopters that HAL produces for the Indian Army, the Navy and the Air Force.

HAL’s finances have come under scrutiny after the defence minister listed orders that had been given to the public sector company and which are in the works and will soon be given to the aircraft manufacturer. After it came to light that the company recently borrowed Rs 1,000 crore to pay salaries, questions have been asked about its financial health.

The company itself has been in the news because the Congress has made it one of the centrepieces in its attack on the Rafale jet fighter deal.

The party has alleged that the National Democratic Alliance replaced an old deal (negotiated by the Congress-led United Progressive Alliance) to buy 126 Rafale fighters, 118 of which were to be made by HAL, with an outright purchase of 36 fighters so as to benefit Anil Ambani’s Reliance Defence, which has entered into an offset deal with Rafale maker Dassault Aviation.

It has claimed that the new deal was struck at a much higher price than the old one. The government has defended the deal, said it had actually paid less for the aircraft, and also clarified that it has nothing to do with offset deals between manufacturers and their partners in India. The Supreme Court recently ruled, in response to a petition seeking a probe into the deal, that it is convinced due process was followed in the deal and that it will not go into issues such as pricing.

HAL, which was expected to supply 16 Tejas fighters to IAF by March this year, has so far delivered 11 and expects to meet its target.

The meeting also discussed payments from the debtors. IAF, for instance, owes Rs 15,000 crore to HAL. According to a senior HAL executive who did not wish to be named, IAF’s outstanding sum is expected to soar to Rs 20,000 crore by the end of this financial year (March 31, 2019).

Madhavan did not respond to queries seeking comment.

The company paid Rs 9,406 crore in three years — 2015-16, 2016-17, and 2017-18 — to the government of India as dividends, to buy back its shares and as tax on buyback and dividend, according to the financial statements of the company and documents accessed by Hindustan Times. Over a five-year period, including 2013-14 and 2014-15, the number increased to Rs 11,024 crore.

In addition, HAL paid dividends of Rs 755 crore, Rs 962 crore and Rs 1,294 crore (the amount includes dividend tax) in the three years ending 2017-18.