Industial Sickness New
Transcript of Industial Sickness New
-
8/2/2019 Industial Sickness New
1/20
-
8/2/2019 Industial Sickness New
2/20
Concept Of Industrial Sickness
The Term Industrial Sickness refers to the phenomenon of
industrial units losing their financial health & closing down
causing loss of production .
It can be classified as :
1. Actual Sickness
1. Potential sickness/ Incipient Sickness
-
8/2/2019 Industial Sickness New
3/20
Definitions of Industrial Sickness
Sick Industrial Companies (Special Provisions Act), 1985
A sick industrial undertaking means, an industrial company (registered
for not less than 7 yrs ) which has at the end of any financial year
accumulated losses equal to or exceeding its entire net worth & has also
suffered cash losses in such financial year immediately preceding suchfinancial year .
State Bank of India (SBI)
A sick unit which fails to generate an internal surplus on a continuous
basis and depends for its survival upon frequent infusion of external
funds.
Industrial Development Bank of India (IDBI)
A unit may be considered sick if it has defaulted the payments of three
installments .
-
8/2/2019 Industial Sickness New
4/20
Classification of Industrial Sickness
Genuine Sickness
Incipient Sickness
Induced sickness / Manmade Sickness
-
8/2/2019 Industial Sickness New
5/20
Signals of Industrial Sickness
Decline in capacity utilization
Shortage of Liquid funds to meet short term financial obligations of creditors &
to meet statutory obligations.
Inventories in excessive quantities of raw materials, goods-in-process & finishedgoods
Non-submission of data to banks & financial institution
Irregularity in maintain bank accounts
Frequent breakdowns in plant & equipment
Decline in the quality of product manufactured dues such as provident fund
(PF), sales tax excise duty , Employee State Insurance (ESI) etc.
-
8/2/2019 Industial Sickness New
6/20
Decline in technical deficiency
Frequent turnover of personnel in the industry
Inability to pay interest on borrowing or non-payement of installments
Inability to pay creditors on time
Incapacity to produce as per schedule
Does not maintain certain financial ratios like current ratio, debt-equityratio
Does not earn a reasonable return on investment
-
8/2/2019 Industial Sickness New
7/20
Symptoms of IS
Persisting shortage of cash
Deteriorating financial ratios
Widespread use of creative accounting
Continuous tumble in thr share prices
Frequent request to banks & financial institutions for loans
Delay & default in the payment of statutory dues
Delay in the audit of annual accounts
Decline in production
-
8/2/2019 Industial Sickness New
8/20
Causes / Reasons fro IS
1}External Causes
Radical changes in Govt policies
Changes in consumers preferences
Cheaper variety of products available in the market
Inadequate & ultimately availability of inputs like raw materials, power,
transport, & skilled labor
Lack & lowering of demand for the product
Recessionary trends
-
8/2/2019 Industial Sickness New
9/20
Frequent industrials & labor unrest
Increase in raw materials cost
Shortage of financial resources especially working capital
Natural calamities like earthquakes, drought, floods etc
Lack of infrastructure facilities
-
8/2/2019 Industial Sickness New
10/20
-
8/2/2019 Industial Sickness New
11/20
Labor problems Feeble marketing skills
Fraudulent practices
Wrong location Mistakes in recruitment & training
Excessive overheads
Over-estimation of demand
-
8/2/2019 Industial Sickness New
12/20
According to V.N.Nadkarni. Some industrial units are born sick, some
achieve sickness & some have sickness thrust upon them
1. Sickness at the inception stage (Born Sickness)
a) Lack of Experience
b) Improper financial management
c) Time & cost overruns
d) Technological factorse) Wrong assessment of the market
-
8/2/2019 Industial Sickness New
13/20
-
8/2/2019 Industial Sickness New
14/20
Consequences / Effects of IS
1. Financial loss
2. Loss of employment
3. Industrial unrest
4. Harm to investment
5. Wastage of Scarce Resources
6. Loss of government revenues
7. Lack of competitiveness
8. Adverse impact on relates units
-
8/2/2019 Industial Sickness New
15/20
Remedial Measures to overcome IS
The identification & detection of sickness at the incipient stage
first & foremost measure to detect & IS
For identifying sickness at an early stage appropriate yard sticks
need to be involved & developed
To avoid social disorder labor problem should be solved . Measure
of a large no. of sick unit will be a welcomed proposition
Sick units must be allowed to closed
Step should be taken up to rehabilitative weak units
-
8/2/2019 Industial Sickness New
16/20
A separate divisions in board for industrial & financial reconstruction
(BIFR) should be opened it to deal with sickness in SSI
The Rehabilitations programs for sick small units consist of only
financial measures , However other problem like managerial marketing
power raw materials should be attainted to in the rehabilitations
programs
The Govt of India & RBI should requested to direst commercial banks .
And financial institutions to provide information on sickness to the
agencies like BIFR implementing the rehabilitations programs
-
8/2/2019 Industial Sickness New
17/20
The necessary knowledge should be imparted to the entrepreneurs inthe different financial areas through the training programs like the
EDP
In a market oriented economy SSIs must put greater emphasis on
pragmatic planning of their function & discover new markets withinnovative product or services
-
8/2/2019 Industial Sickness New
18/20
Government Measures for Rehabilitation & Revival of Sick Industrial Unit
Sick industries policy,1978
Sick industries policy 1981
Sick industrial companies act , 1985
Reserve Bank of India
Assistance by SFCs
Services by Technical Consultancy Organizations(TCOs)
Boar of industrial & finance reconstruction (BIFR)
Industrial Reconstruction Corporation of India (IRCI)
-
8/2/2019 Industial Sickness New
19/20
Commercial Banks
Income tax Relief
Margin Money Scheme
Excise Relief
Single window Scheme
State Level Inter-Institutional Committees (SLIICs)
Working Group on Rehabilitations of Sick units
-
8/2/2019 Industial Sickness New
20/20