Future of HEC hangs in the balance as salaries remain unpaid for over a year

As employees suffer, there is no clarity whether the government intends to privatise a PSU with good potential for profitability.

Published : May 18, 2023 11:00 IST - 10 MINS READ

HEC’s machines, purchased from the erstwhile USSR and Czechoslovakia, are more than 60 years old and need urgent modernisation or replacement. 

HEC’s machines, purchased from the erstwhile USSR and Czechoslovakia, are more than 60 years old and need urgent modernisation or replacement.  | Photo Credit: By Special Arrangement

If you open the website of Heavy Engineering Corporation Limited (HEC), everything looks normal. An April 11 circular under “What’s new” discusses online submissions for the Employees’ Pension Scheme. And there is a “Happy New Year” message to employees on the same page.

HEC, headquartered in Ranchi, Jharkhand, is one of India’s oldest public sector units. It supplies equipment to all major steel plants in India and, according to its website, has contributed to the setting up of the Bokaro and Vizag Steel plants in Jharkhand and Visakhapatnam, respectively. It has manufactured and supplied over 5,50,000 tonnes of equipment to the steel sector, high -grade steel to the Navy, cyclotron magnet poles to the Department of Atomic Energy, forgings for the nuclear power sector, and so on.

Yet, for the past 14 months or so, some 2,700 workmen and 450 executives have not got their salaries. In April 2023, officer grade workers received salaries for the month of February 2022, while workmen got half of their pay for May 2022. Bhawan Singh, a former worker of HEC, said they had all been using their provident fund earnings to survive. Purnendu Dutt Mishra, general secretary of the HEC Officers’ Association, said there had been three rounds of talks with the management for the release of salaries, all inconclusive.

Mishra said that a letter signed by 121 officers had been sent to the National Human Rights Commission, pointing out that they were using up their savings and borrowing from relatives to cover daily expenses, school and college fees, and medical costs. “If something untoward happens, the management will be solely responsible,” said P.S. Paswan, a spokesperson for the officers’ association.

Memorandums to Minister

The association approached local BJP leaders and met Minister for Heavy Industries Mahendra Nath Pandey in February. Its representatives handed him a memorandum in which officers’ and workers’ unions suggested plans to revive HEC and modernise it. Nothing has happened so far.

HEC has not had a permanent chairman since 2018. Nalin Shinghal, the Chairman and Managing Director of Bharat Heavy Electricals Limited, has been given additional responsibility of HEC. Frontline tried contacting Shingal, but there was no response. The Senior Director of Personnel said he would respond regarding the non-payment of salaries, but that did not happen.

What is HEC?
HEC is one of the leading suppliers of capital equipment in India for steel, mining, railways, power, defence, space research, nuclear, and strategic sectors.
It also executes turnkey projects from concept-to-commissioning. It was set up in 1958, and has three operating units in Ranchi, Jharkhand.
It was founded primarily to indigenise the manufacture of steel plant equipment, but subsequently diversified towards manufacture and supply of various import substitute products.

“This is a capital goods industry. We, as engineers, understand its importance and are deeply attached to HEC. The Minister seems to understand it as well. Money was allocated to HEC, but we still did not get our salaries. In the February proposal, we requested that HEC be merged with the Railways or BHEL or be incorporated under the Department of Atomic Energy [DAE]. If the CMD of BHEL can be given additional charge, then why be opposed to a merger?” argued Mishra.

“It is not an ordinary PSU. If the government gives even a little bit of attention, a lot of employment can be generated,” said Bhawan Singh, president of Hatia Mazdoor Union, affiliated with the Centre of Indian Trade Unions (CITU). Singh was part of the delegation that met the Minister. “I detailed the alternative ways in which revenue could be generated to run HEC. Pandey gave us a patient hearing and said he was fully on our side. But little seems to have progressed since,” said Singh.

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In 2022, too, there were similar parleys with the Minister. There was a proposal to transfer HEC’s land to government bodies, which would have generated working capital for modernisation and other purposes. Singh said the union supported this proposal. “We wrote to the Minister to expedite it. It would have contributed to the Prime Minister’s vision of ‘Make in India’ and ensured price parity on capital goods,” he said.

Is the government’s push for private capital the reason for the neglect of HEC? According to Singh, several private players would stand to gain if HEC were to be divested. This, in turn, would increase the cost of projects currently handled by HEC in the areas of defence, space, steel, and atomic energy. Moreover, HEC is set on 5,000 acres of land and used to have some 12,000 residential quarters housing 22,000 employees and their families.

HEC’s machines, purchased from the erstwhile USSR and Czechoslovakia, are more than 60 years old and need urgent modernisation or replacement. In September 2021, the union wrote to the Secretary, Department of Heavy Industries (DHI), pointing out that, apart from the safety hazards involved, workers faced difficulties operating the machines.

“Employees are using up their savings and borrowing to cover daily expenses, school fees, and medical costs.”

A year later, in September 2022, Singh wrote to Minister Pandey, urging his intervention. Salaries had not been paid then for more than eight months, and the management had said it did not even have resources to buy raw material for production. “We asked him to approve a bank guarantee for the payment of pending salaries,” said Singh.

The letter was redirected to the HEC management for action. The management responded the same month, saying the union’s request for leasing HEC land to government agencies had been approved by the Board, along with some other proposals. The proposals are still with the Ministry.

Frontline sent a list of questions to the Union Minister’s office and the Secretary, DHI, requesting a response wit regard to the implementation of the Saraswat Committee’s recommendations on the revival of HECL, budgetary support, payment of salary arrears, plans to privatise HECL, and action taken on the Officers’ Association and trade union representations. But there has been no response from them.

HEC’s decline

HEC’s decline, both in employment numbers and in profits, appears to have begun after the liberalisation of the 1990s. The budgetary support it used to receive gradually declined, and in 1992 the company was referred to the Board for Industrial and Financial Reconstruction. “This is a capital goods producing industry for strategic sectors, not a food processing industry. It needs government support,” said Mishra.

“A Parliamentary Standing Committee said the revival packages “had not focussed on modernisation of plant and machinery”.”

The Annual Report for 2021-22 is telling. For FY 21-22, the company’s order book value totalled Rs.188 crore. As of December 3, 2022, the company had bagged orders worth Rs.1,451.50 crore for electric rope shovels, draglines, slag pots, and forged rolls for steel plants and mining. However, severely impacted by COVID, aging machinery, and breakdowns, the company was unable to meet the orders, the report says. Its turnover dipped to Rs.184.69 crore from Rs.202.76 crore in the previous year.

In protest against the delayed payment of wages, workers went on a month’s tool-down strike from December 2, 2021, to January 7, 2022. Today, both workers and officers are marking attendance every day, but with no salaries and no reassurances from the Centre.

Highlights
  • For the past 14 months, 2,700 workmen and 450 executives of HEC, a key supplier to major steel plants in India, has not got salaries. The company has been recording losses for many years and needs modernisation.
  • Trade union representatives have suggested plans to revive HEC and modernise it. Nothing has happened so far. The government’s push for private capital is cited as one reason for the neglect of HEC.
  • Despite a proposal by the Parliamentary Standing Committee to the Ministry of Heavy Industries to make concerted efforts to revive HEC, the Centre has been non-committal.

Modernisation bid

It would appear that a premier PSU is being deliberately allowed to languish. In March 2017, Babul Supriyo, the then Minister of State for Heavy Industries and Public Enterprises, said in reply to a question in the Lok Sabha that a revival-cum- modernisation plan had been prepared by HEC through MECON, a Government of India enterprise. The plan envisaged an overhaul of HEC’s plants and facilities. Consultations were also held with NITI Aayog, the Ministry of Finance, the Department of Heavy Industries, and the Jharkhand government.

Meanwhile, a Committee of Experts headed by Dr V.K. Saraswat, Member, NITI Aayog, set up in July 2016 for technical appraisal of the modernisation plan, had submitted its report in early 2017. The first phase of the report was taken up for implementation by the Cabinet in March 2017.

A Parliamentary Standing Committee report has classified HEC as one of five loss-making PSUs under the Ministry of Heavy Industries.

A Parliamentary Standing Committee report has classified HEC as one of five loss-making PSUs under the Ministry of Heavy Industries. | Photo Credit: By Special Arrangement

A Standing Committee report (The 292nd Report of the Department Related Parliamentary Standing Committee on Industry) placed before Parliament in 2018 said that after the revival packages from 2005 to 2008, HEC had shown profits till 2012-13, but the revival packages “had not focussed on modernisation of plant and machinery”. They were mainly debt waivers and financial restructuring plans.

HEC’s present financial condition, the report said, was the result of “lack of foresight in not supplementing the waivers of debts with modernisation plans which ultimately caused the company to slip back into losses again”. The report further observed that the DHI, as the administrative department of HEC, “cannot absolve itself of the responsibility for the current situation at HEC”.

The report recommended giving “full weightage to the recommendations of the Saraswat Committee, which had favoured revival by approving the plans proposed by the company” before contemplating strategic disinvestment. The government responded in Parliament that the recommendations of the Saraswat Committee were under consideration and no decision had been reached yet.

The Standing Committee also summarised DHI’s proposals placed before it: HEC was to be “strategically disinvested”, a private partner brought in to run it on a joint venture basis, and non-core assets like surplus land were to be hived off to a separate Special Purpose Vehicle for monetisation. The Standing Committee also observed that except for the idea for monetisation, other proposals were new, and wondered if they were in line with the Saraswat Committee recommendations.

The DHI argued that the financial condition of the company and the repeated failures of past revival packages had prompted it to mull over new ideas. The Committee was unconvinced and pointed out how the revival packages of 2005-2008 had ensured profits for HEC until 2012-13. (In 2013-14, HEC’s profits saw a marked increase due to grants from the Centre and the Jharkhand government, waiver of electricity and water charges, and proceeds from the sale of assets to government agencies. The year 2017-18, too, recorded a profit, which the Annual Report attributed to “extraordinary items of income”. Losses were recorded in all the remaining years.)

In December 2020, the 302nd Report of Department Related Parliamentary Standing Committee on Industry pulled up DHI for its “lackadaisical approach” in implementing the Saraswat Committee report and expressed its “displeasure at the callous and nonchalant approach of the Department in taking remedial measures for reviving HEC”. It noted with “dismay” the “unsuccessful attempt to transfer HEC to the DAE” by DHI. It asked for HEC’s revival to be “prioritised”.

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In March 2023, the 321st Parliamentary Standing Committee report classified HEC as one of five loss-making PSUs under the Ministry of Heavy Industries. The others named were Engineering Projects (India) Limited, HMT, Rajasthan Electronics & Instruments Limited, and NEPA Ltd.

It noted that HEC had posted losses continuously for the past many years. For 2023-24, a token amount of Rs.0.01 crore (Rs.1 lakh) had been allotted as budgetary support. (P.S. Paswan, representing HECL Officers’ Association, told Frontline that they had no knowledge of this.) The Committee recommended that the Ministry make concerted efforts to revive HEC and, if the need arose, to seek additional funds at the Revised Estimate stage.

The Centre, however, appears disinterested in any revival measures, and more inclined towards disinvestment. If this is indeed the case, it behoves the government to make this clear to HEC employees, who have been stranded without pay for 14 months now. Whatever the future might hold, the workers deserve to be in the know.

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