A Standing Parliamentary Committee on Industry has indicted the Government, stating that its commitment to “strengthen public sector enterprises does not sound convincing the way it is treating the revival Plan of the Hindustan Machine Tools (HMT) group of companies” which has been hanging fire several years.
In its report on the revival and restructuring of HMT Ltd, tabled in Parliament by its Chairman Mr Tiruchi Siva on Tuesday, the House panel said the government approved a revival plan in July 2000 by restructuring HMT Ltd and converting it into five separate subsidiary companies, with HMT being a holding company and tractor manufacturing as its core business.
But, “the slow pace with which the Government tries to consider the revival plan is indicative of its mind-set in making our public sector undertakings viable from the point of view of business proposition”.
It excoriated the authorities for having adopted “a casual attitude in not taking measures for modernisation of plant and machinery of HMT to face the increasingly competitive market”.
Stating that a company such as HMT engaged in machine tool manufacturing has a wider market for supplying machines which are in growing demand across the economic segment, the Committee reckoned that out of an approximately Rs 8,000 crore volume business of the industry, HMT Machine Tools is able to capture Rs 200 crore only with the rest being shared by private players and import from abroad.
The Committee said it was given to understand that the HMT suffered decline due to several factors which include the vertical integration of plants and assembly ancillaries with contributory causes including social overhead cost and ageing plant and machinery, resulting in substantial erosion of its networth.
The Rs 880.80-crore revival packages for HMT was considered viable by the Bureau of Industrial and Financial Reconstruction (BIFR), it said adding that the order book position has logged notable increase from Rs 166 crore in 2009 to Rs 236 crore in 2010-11 with good sales turnover too.
The Committee favours appointment of a full-time Chairman-cum-Managing Director for the HMT and its subsidiaries that should be given complete responsibility and independence to make decisions in order to turn around the HMT and other units to be more competitive and commercially relevant. In the case of HMT Ltd manufacturing tractors, the possibility of establishing joint ventures should be explored and in the case of HMT Bearings Ltd a strategic partner may be roped in to carry forward its business.
As the success of the HMT (International) is indicative of the fact that the product range of the HMT companies such as machine tools, watches, tractors, bearings, general engineering products, industrial tools have a market outside the country, this profit-making subsidiary's request to the Government to make it a nodal agency for projects of the Ministry of External Affairs should be considered, the Committee noted.
PSU vs MoU System
In another report on the working of Memorandum of Understanding System (MoUs) the Public Sector Undertakings (PSUs) sign every year by way of potential performance, the House Panel said this system initially focused on accountability and autonomy of PSUs and eventually stressed on their performance appraisal.
The Committee said the MoU system should be such that which would enable the PSUs and their management to take advantage of the opportunities of the market for maximising profits.
While doing so, it said the PSUs must avoid the problems and threats to their commercial viability.
As the time is ripe for the corporate entities not only to use their strategic assets but also take due advantage of the opportunities that abound, the Committee is of the view that MoU system must go beyond financial performance and accord importance to the issue of productivity improvement.