HEC: Slow death of a 'navratna'

Why would the Modi government want to wind up a key ‘mother industry’ in the core sector such as Heavy Engineering Corporation? Its strategic importance is immense and India does need more steel plants and more production to meet domestic demand.

HEC, founded in 1958, is one of the leading suppliers of heavy capital equipment for steel, mining, railways, power, defence, space research, nuclear and defence sectors, having developed an expertise in steel melting, casting, forging, fabrication, assembly and testing of a wide range of products.

It defies a rational mind to try and understand why Prime Minister Modi is determined to destroy one of the country’s navratnas, whose expert team of engineers was at one time reputed to be amongst the best in the world.

When HEC was set up a good six decades ago, it occupied a sprawling 2.1 sq km township in Ranchi, now the capital of Jharkhand, and offered some of the best, most attractive facilities in terms of housing, schooling and healthcare to its executives, workers and their families.

But years of neglect, poor planning, mismanagement and labour trouble have seen its staff shrink to 2,700 engineers and workers from 40,000 at its peak.

In the first week of September 2023, as many as 1,632 contractual workers who were providing key inputs were also shown the door. What is unforgiveable is that even the skeletal staff that remain have not received their salaries for the last 20 months.

A majority of its highly skilled team of technicians, engineers and other workers are dipping into their provident fund savings or else borrowing money on credit from banks.

Two technicians, Madhu Kumar and Prasanna Bhoir, have taken to selling momos and tea. Probably some are following PM Modi’s suggestion and are selling pakoras.

These same engineers had till very recently helped launch the Aditya-L1 spacecraft into solar orbit on 2 September, having helped in the manufacture of key parts of the rocket launcher. The launchpad for Chandrayaan-3, India’s successful moon landing mission, was also built by engineers at the HEC. The same is true of the earlier two Chandrayaan missions.

Some of the equipment that the HEC manufactured for ISRO since 2000 includes mobile launching pads, electric overhead travelling cranes to build the rocket assembly, repositionable platforms and cyclone locks used in these rockets.

The HEC has supplied equipment to all the major steel plants in India too, and played a key role in the setting up of the Bokaro and Vizag steel plants. The extent of its expertise can be gauged from the fact that it has manufactured over 550,000 tonnes of equipment for the steel sector, high-grade equipment for the Indian Navy, and cyclotron magnet poles and forgings for its nuclear power plants for the department of atomic energy.

Bhawan Singh, a former HEC worker, and president of the Hatia Mazdoor Union, affiliated to the Centre for Indian Trade Unions (CITU), said, “In February this year, a delegation from HEC met the minister of heavy industries, Mahendra Nath Pandey, with a list of specific doables which, if implemented, could help turn the company around.”

“We told the minister that all we needed was working capital of just Rs 1,200 crore to revive HEC,” recalled one of the members of the delegation. “He heard us out in silence but said that all matters pertaining to the HEC were being handled directly by the Prime Minister’s Office and we needed to contact the officials there. We have sent several emails to the concerned officials but have received no response from them.”

“What conclusion can we draw from what was told to this delegation by the minister of heavy industries?” asked Amal Pandey, an activist with the Ranchi-based NGO Sajha Manch. “We believe Prime Minister Modi is just waiting for the 2024 Lok Sabha elections to be over before HEC is handed over to the Adani group. That is the only reason why such an important and vital plant has been completely sidelined.”

This suspicion is supported by facts on the ground. A high-powered committee led by NITI Aayog member Vijay Kumar Saraswat, a former DRDO secretary, listed out a ‘modernisation and revival plan’ for HEC. This document was prepared in 2016, and highlighted that the plant needed to be automated in order to make it competitive.

The planning document also emphasised that the old system of the government ensuring that HEC receives guarantees from the State Bank of India should be resumed immediately in order for it to have working capital to meet its expenses.

It also stressed that the government needed to immediately appoint a managing director and a board of directors to ensure the efficacious running of the plant.

Saraswat’s suggestions have, however, been ignored and HEC has been without a managing director for the last three years. Since the central government had cancelled the bank guarantee from the SBI, the HEC has had no choice but to raise capital from the market at exorbitant interest rates, which has worsened its financial crisis.

This seems to be the pattern with a large number of government PSUs which remain headless. Firms like Engineers India Ltd, the Indian Railways Catering and Tourism Corporation (IRCTC), National Fertilizers Ltd and National Textile Corporation Ltd have been handed over by senior officials in the PSUs to ministry officials of the relevant government departments to run.

Other PSUs with vacant top management posts include Bharat Electronics Ltd, Bharat Dynamics Ltd, Bharat Earth Movers Ltd, Mazagon Dock Shipbuilders Ltd and the Bharat Petroleum Corporation.

Senior engineers of HEC point out that it presently has pending orders worth over Rs 1,500 crore from various clients. But these orders cannot be fulfilled till it receives working capital and funds to update its equipment and bring it on par with the latest technology. Bhawan Singh pointed out, “Our biggest asset now is the land. Sadly, we are not able to sell it to raise funds to bail out HEC. Actually we have never enjoyed any independence in our functioning, with all decisions being taken by the central government.”

“If given a free hand, we could easily raise this money and much more; but, sadly, our hands are tied,” said another senior official, speaking on condition of anonymity.

The HEC’s vast land holdings have been sold or reacquired by the Jharkhand state government to build a ‘smart city’, a legislative assembly, a high court and a judicial academy. But the proceeds from these sales have not accrued to the empty coffers of the HEC, which continues to remain bankrupt, per its employees.

A leading defence analyst expressed shock at these developments. “HEC provides key inputs in the areas of defence, space and atomic energy. Even the barrel of our artillery guns is manufactured by HEC. If the government disinvests from HEC, we will become more dependent on imports and this will hike the costs of all our defence, space and atomic energy equipment. The government keeps talking about the need to manufacture locally but is doing just the opposite,” the analyst said.

Steel manufacturing is a critical industry that has a tremendous impact on a nation’s economy since steel is a prerequisite for many other industries—from construction to weapons manufacture to transportation.

Why, then, is the Modi government determined to disinvest from major steel manufacturing units in the country? Only recently, to cite just one example, the Rashtriya Ispat Nigam Ltd (Visakhapatnam Steel Plant) was up for sale. Few buyers showed any genuine interest and there are now strong rumours that the sale is being called off. The only plausible explanation would seem to be that their goose is being cooked to serve up on specific plates, already identified.