BANGALORE: Hindustan Aeronautics Ltd (HAL) may have hit the headlines for not being paid Rs 15,700 crore of its dues by the ministry of defence, but the problem is apparently not limited to the defence PSUs alone. Small and medium-level defence contractors have also claimed that the MoD has not been paying them their dues, resulting in more than 7,000 of them being severely hit.

The contractors say their pending bills are worth Rs 1,600 crore, and the outstanding amount could touch Rs 2,000 crore by March. The ministry owes contractors in the southern region more than Rs 450 crore. More than 24 hours after TOI sent queries to MoD, there was no response.

Officials from the Military Engineer Services(MES) have indicated that they are grappling with acute funds shortage and suggested that contracts for which "there is no money to pay" be "suspended". Azizullah Khan, senior vice-president of MES Builders Association of India, New Delhi, the only association of defence contractors authorised by MoD, said: "Contractors have almost stopped or slowed down work, have lost their market value as they're unable to pay suppliers."

According to contractors, the armed forces - mainly the Indian Air Force and the Army - owed them Rs 1,600 crore as of March 2018, pending from the previous year. Of this, about Rs 1,000 crore was paid, leaving Rs 600 crore worth of bills uncleared.

"Then the payments just stopped. By September, unpaid bills were worth Rs 1,600 crore again. We then planned a nation wide strike, but the defence minister met us just before Diwali and promised payments both before and after the festival and requested us not to go on strike," Khan said.

Soon after, Rs 250 crore was released by the MoD, leaving about Rs 1,400 crore in pending bills, including a few more that were added.

"Most of the Rs 250 crore went to big contractors like L&T, and a majority of contractors did not get their dues cleared. The minister's promise of another instalment being released has not materialised," Khan added.

Tilak Narayanaswamy, secretary of the Bangalore chapter of MES Builders Association, said: "The fact that MoD has not even been able to pay this much is alarming. Even Rs 2 crore or Rs 3 crore money means big trouble for contractors. In the 30-plus years that I've worked with the military, I've never experienced such a situation."

A letter to all MES formations in the country from the engineer-in-chief of the service in October last, reads: "For running works where payments are held up due to funds crunch and the contractor is not in position to progress work, the work shall be put under suspension…" A copy of this letter is with TOI and contractors said every meeting with officials has elicited the same response. "There has been no development since then," Khan said.