CAG raps HAL for Rs 43 crore excess payment as incentives

CAG today pulled up Defence PSU Hindustan Aeronautics Limited (HAL) for excess payment of Rs 43 crore as incentives to its management in 2009-10 by adopting an "illogical" method of calculating the profits of the company.

In its report tabled today in Parliament, the Comptroller and Auditor General (CAG) said HAL's Profit Before Tax (PBT) of Rs 2,688 crore for 2009-10 included income from interests received by the company from the advance payments made by the Defence Ministry. "Company's PBT of Rs 2,688 crore included interest income of Rs 1,525.60 crore earned on short-term deposits of funds received mainly as advances from the Defence Ministry for various projects entrusted to the company," the report said. Also Read: CAG pulls up two steel PSUs for Rs 312 cr loss The government auditor said the interest income made from advance payment of Rs 35,000 crore by the Ministry is clearly disproportionate to the actual sales turnover of the company. "It is illogical to reckon such income as one arising from the normal business and core activities of the company," it said. The report said if "the PBT had been arrived at only from income related to the core activities of the company, the Performance Related Pay (PRP) payable would have been only Rs 58.09 crore instead of the Rs 101.27 paid finally to the executives." It said the company was not including the income from interests for computing the PRP in 2007-08 and 2008-09. It also termed as "unacceptable" the Defence Ministry and HAL's reply that interest income qualified for PRP as it was from prudent working capital management of funds received through contractual terms of sale. The CAG rapped the Ministry saying it should have advised HAL to exclude the "interest income" for working out incentives to be given to company's executives.