Concept The problem of sickness has adversely affected the health of the industrial sector in PARTICULAR and the

economy in GENERAL

Definition
Industrial sickness is defined in India as "an industrial company (being a company registered for not less than seven years) which has, at the end of any financial year, accumulated losses equal to, or exceeding, its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year".

Definition according to Companies (Second Amendment Act)

sick industrial company means an industrial company which has Accumulated losses in any financial year which are equal to 50% or more of its average net worth during four years immediately preceding such financial year Failed to repay its debts within any three consecutive quarters or demand made in writing for its repayment by a creditor or creditors of such company

Causes Of Sickness

External Causes Internal Causes

Power cuts

Demand & Credit restraints

Internal Causes

Erratic supply of inputs

Government policy

Internal Causes
1.

2.
1. 2. 3. 1. 2. 3. 4. 1. 2. 3.

Power Cuts: Lack of Power electricity support Shortage in electricity Erratic Supply of Inputs Shortage of Raw Material Lack of transportation facility High Price Demand and Credit restraints No equal balance of demand and supply Lack of credit facility Storage expenses Chance of out of fashion Government Policy Change in government policy Lack of Government support High authority to large unit

Faults at the planning & construction stage

Labour problems

Defective plant & machinery

External Causes

Management problems

Financial Problems

Entrepreneurial incompetence

External Causes
1.

2.
3. 1. 2. 1. 2. 3. 4. 1. 2. 3.

Fault at the planning & construction stage Wrong location Area Absence of Market Analysis Unbalance Capital Structure Financial Problem Unable to repay Lack of financial support from banks and other financial institutions Defective plant and machinery Lack of technical & professional skills Lack of technology Lack of efficient machinery High maintenance Entrepreneurial Incompetence Lack of market knowledge Lack of efficient professional skills Lack of innovation

 1.

2.
1. 2. 3.

Management problem Inefficiency of management Lack of expertise Labour problems Lack of inefficient labour Lack of coordination in work Unsatisfied Labour

Consequences of Industrial Sickness

In a planned and underdeveloped labour surplus economy like India , industrial sickness can have serious consequences

Consequences

Set-back to employment prospects

Fear of industrial unrest

Adverse Wastage of impact on resources related units

Adverse effect on investors

Losses to banks & financial institutions

Loss of revenue to government

Remedial Measures

Steps taken by banks

Concessions by Government

The Industrial Investment Bank of India

Policy framework of the Government

Steps for detecting sickness early

Board for Industrial & financial Reconstruction

Measures
1. 2. 3. 4.

1. 2. 1.

2. 3.

Steps taken by banks Giving adequate working capital when there is a shortage Recovery of interest reduced rate Defining the special cell in the RBI Arrange the special committee of state level in the local branch for link between the financial institution & govt agency Policy framework of the Government SWOT analysis of industry Liberalization of sick industries Concessions by the Government Giving high facilities to large industries to take over the small sector for revival High liberalization in terms of financial rather than intervention Introduce the scheme for sick industry


1.

1.

2.

3.

Steps for detecting sickness early Corrective actions taken by RBI The industrial investment bank of India Set up the IRCI(Industrial Reconstruction Corporation of India) Convert IRCI into IRBI in March 20,1985 Convert IRBI into IIBI in March 27,1997