The fate of Chairman and Managing Director of the public sector giant HMT Ltd, S.G. Sridhar, hangs in the balance while the Department of Heavy Industries (DHI) decides what action is to be taken against him, highly placed sources in the DHI told The Hindu. This follows an internal inquiry by the DHI earlier this year into the running of the HMT Ltd’s tractor manufacturing unit at Pinjore that uncovered a scam running into hundreds of crores of rupees in which sales, production and turnover figures were systematically fudged and over-reported in the annual reports and other official statements of account. The data falsification started in 2011. Mr. Sridhar was appointed CMD on 19.9.2011.
In March, the Union government approved a Rs. 1,083-crore revival package for the public sector company, based on what appeared to be an improvement in performance. In particular, company reports, which showed a reduction in losses and an increase in output and sales, may have had a bearing on the decision.
However, it now transpires that the figures were dressed up by the management to strengthen its case for the Centre’s grant, according to privileged sources in the DHI.
In the April-December 2012 period, the plant utilised only 22 per cent of its capacity of producing 10,000 tractors per annum — its peak production was in 2000 when it manufactured 7,000 tractors — and was reeling under heavy cash losses. According to data put out by the Tractor Manufacturers’ Association, HMT’s share of the Indian tractor market is just 0.5 per cent.
The fudging involved concealing production backlogs and “adjusting” them in the following financial year. Thus, there was an over-reporting of 771 tractors produced in 2011-12 and of 596 tractors in 2012 (April-December).
The data-fixing had a snowballing effect. The falsified production data resulted in the overbooking of tractors to distributors. And rather in the spirit of Chichikov, the protagonist of Gogol’s Dead Souls, who buys “souls” (serfs) who have died but whose names are still in property registers, the HMT management collected bookings for 1,416 non-existent tractors in the April 2011 to December 2012 period. According to DHI insiders, with the available working capital, the company is not even able to reach the break-even production level of 700 tractors a month.
Headquartered in Bangalore, the 60-year-old HMT — for several decades the celebrated timekeeper of the nation, and a powerful home-grown manufacturer of capital goods — was severely hit by the new policy and business regime post-1991. In 2000, HMT was broken into five subsidiary companies, HMT Ltd. (which controls the Pinjore tractor plant), HMT Machine Tools, HMT Watches Ltd., HMT Chinar Ltd., HMT Bearings and HMT (International) Ltd. This was primarily done to give autonomy to the subsidiaries and to leverage the company’s experience and skills through product diversification. Poor leadership and bad planning since then have taken the company further into the doldrums.