HMT bailout package to cost Rs 1,000 cr

Centre prepares revival plan for sick subsidiaries

The government is planning a capital infusion of Rs 1,000 crore in HMT Ltd. It also proposes to waive a part of the public sector company's high-cost debt.

A part of the capital infusion would be used to wipe off accumulated losses of nearly Rs 1,600 crore, an official in the heavy industries ministry said.

The official said in line with the National Common Minimum Programme (NCMP), the present government was waiving outstanding dues of loss-making PSUs like HMT and its subsidiaries to strengthen the public sector.

In the case of HMT, the government will try to revive its unit in Jammu and Kashmir, HMT Chinar Watches Ltd, which has an accumulated loss of nearly Rs 80 crore. The HMT subsidiary has a negative net worth of Rs 85.95 crore.

Most HMT subsidiaries were previously referred to the Board for Financial and Industrial Reconstruction. However, these cases were now being reviewed in the light of the NCMP.

The official said though HMT's subsidiaries had accumulated losses of about Rs 1,600 crore and an eroding net worth at Rs 1,500 crore, if the loans of these companies were waived, they would be back in the black. In fact, their production strength would be equal to industry standards, he added.

The Bangalore-based HMT Ltd, which is the holding company, retains the tractor division. Its constituent subsidiaries are HMT Machine Tools Limited, HMT Watches Ltd, HMT Chinar Watches Ltd, Praga Tools Ltd, HMT International Ltd and HMT Bearings Ltd. Apart from the holding company and HMT International, the net worth of all other subsidiaries are in the negative.

The PSU underwent organisational restructuring in 2000, when the business groups were converted into four new subsidiary companies.