i Indian the definition given by Reserve Bank of India, most banks Foy, units as sick, if one or more of the following factors occur 1 Y th, (a) Cash losses for two years or more (b) Net worth erosion 50 per cent or more (c) Drawing exceeds the value of securities for over 12 months (d) Irregular working capital limits re (e) Stoppage of production for long (f) Unpaid statutory liabilities for one year or more such as. Sales ta, provident fund, etc. General unpaid liabilities for one year or more, such as general) Unpaig wages, etc. ‘CAUSES OF INDUSTRIAL SICKNESS ¢ nature and causes of sickness differs from industry to indu: unit to unit. Industrial sickness is generally caused by: (a) several mtrollable external factors, and (b) a number of controllable interna) ‘External Causes for Sickness "External causes of sickness are: 1, Personnel Constraints The first most important reason for sickness in small scale industries are personnel constraints. These are: (a) non availability of skilled labour or power, (b) wage disparity in similar industries, and (c) general labour nrest. , Marketing Constraints The second cause for sickness is related to marketing. Industrial sickness ‘arises due to: (a) liberal licensing policies, (b) restrain of purchase by bulk ‘Purchasers, (c) changes in global marketing scenario, (d) excessive tax ™ policies by government, and (e) market recession. _ 3. Production Constraints Production constraints is another reason for sickness which comes under | external causes of sickness. This arises due to : (a) shortage of raw material, (I (0) shortage of power and fuel, (c) high prices, and (d) import-export trictions. " Financial Constraints sav ler external cause for the sickness of SSIs is lack of finance. Ths due to : (a) credit restrain Policy, (b) delay in disbursement of loa!. Lack of Finance is includes: (a) weak equity base (b) ilisati Vv h ; . Poor util ) inefficient working capital management, (d) absence Renae a # d pricing, (e) absence of planning and budgeting, and (f) ina Sue tilisation or division of funds, ' Peri? Wrong Production Policies cludes: (a) wrong selection of site for Production, (b) inappropri i i 3, ite plant d machinery, (c) bad maintenance of plant ‘ppropriate plan 1 and machinery, (d) lack of ality control, and (e) lack of standard research and development, Inappropriate Marketing Policies nother factor which always affects the health of an industry is the arketing policy. It includes : (a) wrong demand forecasting, (b) selection f inappropriate product mix, (c) absence of product planning, (d) wrong rket research methods, and (e) bad sales promotions. Inappropriate Personnel Management nother internal reason for sickness of industry is inappropriate personnel lanagement policies. It includes: (a) poor wages and salary administration, ) bad labour relations, and (c) lack of behavioural approach causing issatisfaction among the employees and workers. Ineffective Corporate Management fficient corporate management is another reason for sickness. It includes: ) improper corporate planning, (b) lack of integrity in top management, id (c) lack of coordination and control.strial Sickness ' 4 CONSEQUENCES OF INDUSTRIAL SICKN te i dustrial sickness has many harmful conse ESS ' hole. These are : ‘quences for an economy as a i istress for Owners sing a sick unit can bring a lot of distre investment in similar projects, ” It di yes uses Unemployment unit ultimately closes down, it throws w ; adds to the already existing Beir cvrrcar aii out of employment. tt situation in the country. es Loss g of sick industrial units causes i eee 2 substantial los: ial institutions which had granted loans to these me ee Adversely Affects the Linked Firms fost of the firms have forward and backward linkages. Sickness in a firm through a chain reaction and adversely affects a number of linked Wastage of Resources losure of a sick undertaking results in wastage of valuable resources. Burden on Government k units become a burden on the government. If such units are closed own, there is loss of revenue for the government in the form of levies and ixes. And, if such units are taken over by the government, the government s to bear the burden of maintaining them. 7.5 REMEDIES FOR INDUSTRIAL SICKNESS problem of sickness has to be tackled from two angles: ¢ Preventive Measures | Remedial Measures Preventive Measures heck list to serve as early warning sig ause before sickness finally sets in, a s' the functional areas of production, mark symptoms are identified at the creeping nals should be evolved. This is teady deterioration is noticed eting, finance, etc. The earlier stage of sickness, easier it is of remedial treatment. On cure the disease. It will also reduce the cost of | ; s of the diagnostic study, @ package of reliefs and concessions to i : be sa i ¥. fo176 Indian review and rehabilitate a sick unit are devised by different Agencies, The treatment package is prepared by banks, financial institutions, Bovern men agencies, shareholders, non-institutional creditors and the workers, Only gn unified effort of all concerned, can ensure quick revival ofa Potentiaty viable sick unit. It is, therefore, necessary that all Parties concerned wit the revival of the sick unit, should realise their responsibilities ang ty play their part purposefully and concertedly, 2. Remedial Measures Remedial measures are taken once sickness has set in. These include: (a) Steps taken by banks and financial institutions. In an effort to bilitate the sick units, a number of concessions have been given t0 sick | units by banks and financial institutions. These are: indust (i) continuous monitoring of units (ii) careful project appraisal (iii) professional institutional response to unit’s problem (iv) provision of additional working capital in order to remove the difficulties arising out of shortage of working capital (v) charging lower rate of interest on the outstanding amount, (b) Steps taken by the government. Government has been taking mea. Sures, from time to time to put industrial growth along health lines, Some of them are : (i) There is Industries (Development and Regulation) Act 1951, which provides for the takeover of a sick unit by the Government of India. Before resorting to a takeover, other alternatives like rehabilitation through the concerned state government and finan- cial institutions or for the merger of a sick unit with a healthy unit could be explored. (ii) Sick Industrial Companies Act 1985, which was passed by par- liament and received the assent of the President in January 1986, was amended in December 1991 so as to bring government com- panies within the preview of the Act, There is Industrial Reconstruction Bank of India (IRBI) which came into being on March 20th, 1 985, by converting the erstwhile Industrial Reconstruction Corporation of India. It provides assis tance for reconstructions and rehabilitation of the sick industrial units by granting loans and: advances, underwriting shares and _ debentures, etc, or the sick units in the small scale sector, separate facilities a Available, State Finance Corporations and CommercialGovernment gives concessions to si rebates, writes off interest obligations, In June 2002, an ordinance was which gave powers to banks and their claims on credit, without ge some judicial process. ick units in the { orm en of tax passed by the President of India financial institutions to enforce oing through long and cumber- rious studies have been undertaken to identify sick units which restored to health. The root cause of industrial sickness is Pica y rial. It is important that all concerned parties take serious Took problem and work in the right earnestness, only then can the e of industrial sickness be reduced to the desired extent. nition of Industrial Sickness ording to RBI, sick unit is one which has cash losses for two years or , or/and net erosion of 50% or more, or/and unpaid statutory and general ilities, etc. juses of Industrial Sickness External factors (@) Personal constraints '(b) Marketing constraints (c) Production constraints (d) Financial constraints Internal Factors {@) Lack of finance {b) Wrong production policies {c) Inappropriate marketing policies (d) Inappropriate personal management ©) Ineffective corporate management.