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industrial sickness in India


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industrial sickness in India

  1. 1. PRESENTATION ON… Industrial Sickness in India prithvi rani 2nd
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.