Labour pains at HMT

The Hindustan Machine Tools' Pinjore unit has been passing through one of the worst times in the four decades of its existence. The unit's turnover has fallen from about Rs 50-60 crore (Rs 500-600 million) a few years back to Rs 38-40 crore (Rs 380-400 million) last year.

On the other hand, a rise in the salary bill, power tariffs and incput costs have loaded the expense side to a point where it is difficult to remain viable for long.

Ironically there is neither a fall in demand for its products in the domestic and international markets nor any problem with the manufacturing.

The Pinjore plant had recently supplied 26 machines out of the total order of 40 to the prestigious Toyota-Kirloskar project in Bangalore.

The burgeoning number of employees is eating into HMT's profits: labour costs amount currently to as much as 50-60 per cent of the total cost of production.

The unit manufactures computerised numerically controlled machines machines, each of which costs between Rs 50 lakh (Rs 5 million) and Rs 1 crore (Rs 10 million).

Besides, it manufactures milling and broaching machines, each with a price tag of Rs 500,000-10 lakh (1 million) per unit. More than 50 percent of the CNC machines manufactured are exported to various countries, with significant numbers headed for Japan and Iran.

But the company insiders say the management lacks initiative and the drive to convert orders into profits.

As a result, the workers say their services are not being utilised optimally. The factory has a good order book but due to late dispatches, the payments are getting delayed.

This vicious cycle has affected both the workforce and suppliers.

Of late, two orders for CNC machines for the domestic market were cancelled due to the delays in dispatch. Three machines destined for Iran have also been delayed.

Quality, which used to be HMT's hallmark, has also suffered a lot in the last few months. The employees allege that due to sheer carelessness of the management staff, some consignments sent out had missing components.

HMT's suppliers are in dire straits because often their payment cheques are not honored. HMT has about 100 vendors all over India, especially in Pune, Banglore and Coimbatore but the plight of local ancillaries is even worse.

While outstation ancillaries have the comfort of letters of credit, local vendors are denied that facility. As a result, they cannot even raise bank finance to augment their working capital.

One of the suppliers told Business Standard that at times they are forced to release the next consignment in order to obtain payment for the previous one.

HMT's fall from grace is playing havoc with the fortunes of the ancillaries. An ancillary has to invest between Rs 50 lakh-Rs 1 crore -- which is no small amount for small firms supplying to one single company.