Industrial sickness in india: introduction, concept, meaning definition, signals, measures causes, effects, magnitude, data, suggestions, SICA 1985, features, BIFR, reporting , enquiry, amendment act, case study of hindustan motors, related headlines, conclusion

1. PRESENTATION ON
INDUSTRIAL SICKNESS
BY: NEHA SINGH
PEMA KHANDO

2. •
Industrial sickness has been growing from the last decade.
•
Many traditional and modern industries are now being
effected by industrial sickness.
•
Persisting problems are been faced by the industrial sector of
the country
INTRODUCTION

3. CONCEPT

4. •
TO LAYMAN –SICK UNIT IS ONE WHICH IS NOT
HEALTHY.
.
TO AN INVESTOR-ONE WHICH SKIPS DIVIDEND.
.
TO AN INDUSTRIALIST-A UNIT WHICH IS
MAKING LOSSES.
.
TO A BANKER-WHICH INCURRED CASH LOSSES
IN PREVIOUSE YEAR & LIKELY TO REPEAT
PERFORMANCE IN CURRENT & FOLLOWING
YEARS
MEANIN
G

5. DEFINITION
Industrial sickness is defined in India as "an
industrial company (being a company registered
for not less than five 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

6. 1- SHORTAGE OF LIQUID
FUNDS TO MEET SHORT
TERM FINANCIAL
OBLIGATION
2- DECREASING RATE OF
RETURN
3- UNDERUTILISATION OF
CAPACITY
4- ACCUMULATION OF
EXCESSIVE
INVENTORIES

7. 1-Wrong location
2- Technological factors
3-Inexperienced promoters
4-Investment in
unproductive capital assets
5-Long gestation period
*Internal causes
*External causes
Causes of born
sickness
Causes of achieved
sickness
Causes of industrial sickness

8. 1-POWER CUT
•Lack of power electricity support
•Shortage in electricity
2-ERRATIC SUPPLY OF INPUTS
•Shortage of raw material
•Lack of transportation facility
•High price
EXTERNAL CAUSES

9. 3-DEMAND AND CREDIT
RESTRAINTS
•No equal balance of demand and supply
•Lack of credit facility
•Storage expense
•Change of out of fashion
4-GOVERNMENT POLICY
•Change in government policy
•Lack of government support
•High authority to large unit

10. INTERNAL CAUSES
1-FAULT AT THE PLANING AND
CONSTRUCTION STAGE
•Wrong location area
•Absence of market analysis
•Unbalance capital structure
2-FINANCIAL PROBLEMS
•Unable to repay
•Lack of financial support from banks and
financial institutions

11. 3-DEFECTIVE PLANT AND
MACHINARY
•Lack of technical and professional skills
•Lack of technology
•Lack of efficient machinery
•High maintenance
4-ENTREPRENURIAL INCOMPETENCE
•Lack of market knowledge
•Lack of inefficient professional skills
•Lack of innovation

12. MANAGEMENT PROBLEMS
•Inefficiency of management
•Lack of expertise
LABOUR PROBLEMS
•Lack of inefficient labour
•Lack of coordination in work
•Unsatisfied labour

13. Industrial sickness is growing at an
annual rate of about 28% & 13%
respectively in terms of no .of units
and outstanding number of bank
credit.
It is estimated that as of today there
are more then 2lakhs sick unit.
With an outstanding bank credit of
above Rs.7000crores.
Nearly 29000 units are added to sick
list every year.

15. 1-UNEMPLOYMENT
2-WASTAGE OF RESOUCES
3-LOSS ECONOMY AND GOVERNMENT
4-LOSS OF BANKS AND FINANCIAL
INSTITUTIONS
5-INDUSTRIAL UNREST

17. SUGGESTIONS TO PREVENT AND CURE
INDUSTRIAL SICKNESS
1-Proper project planning
• Location of project
•Availability of raw material
•Availability of labour & technical staff
•Availability of finance at reasonable rates.
2-Proper Market Analysis
•Demand forecasting
•Study of opportunities & threats of
environment
• Consumer tastes & preferences
•Availability od reliable distributors
3-Soft loans for sick units
4-Avoid over-capitalisation.

18. STEPS TAKEN BY BANKS
1-Giving adequate working capital when there is
shortage
2-Recovery of interest reduced rate
3-Defining the special cell in the RBI
4-Arrange the special committee of state level in local
branch for link between the financial institution and
government agency
MEASURES

19. POLICY FRAMEWORK OF THE
GOVERNMENT
1-SWOT analysis of industry
2-Liberalisation of sick unit

20. CONCESSIONS BY THE
GOVERNMENT
1-Giving high facilities to large industries to take over
the small sector for revival
2-High liberalization in terms of financial rather than
intervention
3-Introduce the scheme for sick industry

21. A unit is defined as sick industrial company where:
•A company is registered for not less than 5 years
•It incurred cash losses for the current &
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.
SICK INDUSTRIAL COMPANIES(SPECIAL
PROVISIONS) ACT,1985 (SICA)

22. •Act extend to whole of India
•Act is not applicable to SSI
•All govt. industrial company are
brought under this act
•provides legal identification of
sickness in industrial organization
•Act provides for establishment of
BIFR
•Act also establish AAIFR for
hearing appeals against order of
BIFR.

24. To report the sickness to the BIFR within 60days of
finalisation of audited accounts , for the financial year at the
end which the co has become sick.
The BIFR prescribes a different format for the report to
be submitted by any interested parties regarding the sickness.
For eg-banks, other financial institutions.
When a co has been financial by a consortium of banks, it
is the lead bank that should report to BIFR about the
sickness under advice to other participating bank in the
consortium.
REPORTING TO THE
BIFR

25. -When a case is referred to the BIFR, it is verified
by the registrar of the BIFR as to whether the co
is SICK.
-BIFR accept the cases and notifies a date for
hearing the case.
-invites the information sick co to come to
negotiation with the concerned financial
institutions.
-after the survey and hearing, the court summons
the rehab to an operating agency.

26. DEFINITION ACCORDING TO
COMPANIES (2ND
AMENDMENT) AVT,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 co.

29. BOARD OF INDUSTRIAL AND FINANCIAL
RECONSTRUCTION (BIFR)
A central govt. agency that helps
restructure bankrupt companies or
close down sick unit.
-HM is the 3rd automobile company to
report in BIFR’S door after PAL, the
maker of premier Padmini and FIAT
India.

30. -Chennai plant is being planned to turn in to a
separate entity.
-The Chennai unit does contract manufacturing
for auto giants such as Mitsubishi and Isuzu.
-It also intends to bring in foreign investment for
its Chennai and West Bengal units.
-it recently launched the the BS-IV Ambassador
encore and is developing a sub-4metre version.
-Besides Ambassador, HM also has winner trucks
in its portfolio.
-The company management says overall vehicle
sales would increase to 7500 units this year.

34. CONCLUSION
In a planned and underdeveloped labour surplus
economy like India ,industrial sickness can have
serious consequences. The sick units may be
attempted to be turned around through efficient
management, change in top level executing a turnover
strategy
“sickness is mankind’s greater defect”.
“HEALTH IS NOT VALUED TILL SICKNESS
COMES”