industrial sickness in India
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Industrial sickness in India has been growing at an annual rate of around 28% and 13% in terms of number of units and outstanding bank credit, respectively. There are currently over 2 lakh sick units in India with outstanding bank credit of over Rs. 7,000 crore. Around 29,000 units are added to the sick list every year. Causes of industrial sickness include both external factors like government policy, supply issues, and demand constraints, as well as internal factors like outdated technology, financial problems, and management issues. Consequences of industrial sickness include job losses, industrial unrest, wastage of resources, and losses for banks and financial institutions. Various measures have been taken to remedy industrial sickness, including assistance from banks
industrial sickness in India
- 1. PRESENTATION ON… Industrial Sickness in India prithvi rani 2nd m.com.
- 2. Definition of Industrial Sickness- •Sick Industrial Companies Act, 1985 A unit is defined as sick industrial company where: •a company is registered for not less than seven years •It incurred cash losses for the current and preceding financial year. •Its net worth was eroded. •Even 50% or more of the net worth of the past 5 financial years is eroded because of accumulated losses
- 3. Definition For Small Scale Sick Units • Incurred losses in previous and current year • Due to cumulative losses 50% or more of its peak net worth during past 5 years should be eroded. • They must have continuously defaulted 4 consecutive installment of interest or 2 half yearly installment of principal. • Large small scale unit – all 3 criteria should be fulfilled • small small scale unit - any 1 of the criteria should be fulfilled
- 4. Definition According to companies (2nd Amendment) Act, 2002 “Sick Industrial Company” means an unit which has • accumulated losses in any financial year which are equal to 50% or more of its average net worth during 4 years immediately preceding such financial years ; or • Failed to repay its debts within any 3 consecutive quarters on demand made in writing for its repayment by a creditor or creditors of such company.
- 5. Magnitude of industrial sickness in India • Industrial sickness is growing at an annual rate of about 28% and 13% respectively in terms of No. of units and out standing number of bank credit. • It is estimated that as of today there are more than 2 lakhs sick units • with an outstanding bank credit of over Rs7000crore • nearly 29000 units are added to sick list every year.
- 6. Causes of Industrial Sickness- External Causes 1)Govt. policy 2)Erratic Supply of Inputs 3)Demand & credit restraints 4)Technological Factors 5)Power Cuts Internal Causes 1)Out dated Technology 2) Financial Problem 3) Management problems 4) Labour Problem 5) Marketing & Sickness
- 7. consequences of industrial sickness • set-back to employment •Fear to industrial unrest •Wastage of resources •Adverse impact on related units •Adverse effect on investors &entrepreneurs •Losses to banks and financial institutions •Loss of revenue to government
- 8. Remedial Measures •Steps taken by commercial banks: provide working capital assistance Recovery of interest at reduced rates Suitable moratorium on payment of interest Freezing a portion of outstanding in the accounts No. of organizations or agencies were set up: - sick industrial undertaking cell - state level inter-institutional committees - standing coordination committee - special cell – rehabilitation finance division of IDBI
- 9. • POLICY FRAME WORK OF THE GOVT. : REMEDIAL MEASURES Ministry were given more responsibility They were responsible in detection of sickness at the early stage Policy frame work was framed in 1981 & reviewed in 1982 •Concessions by the govt. : No. of concessions was given by the govt. Margin money scheme was introduced Excise loan were provided
- 10. REMEDIAL MEASURES • THE INDUSTRIAL Investment BANK OF INDIA: -Establishment of Reconstruction Corporation of India - to provide all kinds of assistance - IRCI converted to IRBI (industrial reconstruction bank of India) • BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION -Rehabilitation package -Operating agencies will designed the scheme
- 11. Conclusion To conclude, the sick units may be attempted to be turned around through efficient management, change of top level executive, executing a turnaround strategy.