Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

INDUSTRIAL SICKNESS IN INDIA

5,387 views

Published on

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

Published in: Economy & Finance
  • Be the first to comment

INDUSTRIAL SICKNESS IN INDIA

  1. 1. PRESENTATION ON INDUSTRIAL SICKNESS BY: NEHA SINGH PEMA KHANDO
  2. 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. 3. CONCEPT
  4. 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. 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. 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. 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. 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. 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. 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. 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. 12. MANAGEMENT PROBLEMS •Inefficiency of management •Lack of expertise LABOUR PROBLEMS •Lack of inefficient labour •Lack of coordination in work •Unsatisfied labour
  13. 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.
  14. 14. 1-UNEMPLOYMENT 2-WASTAGE OF RESOUCES 3-LOSS ECONOMY AND GOVERNMENT 4-LOSS OF BANKS AND FINANCIAL INSTITUTIONS 5-INDUSTRIAL UNREST
  15. 15. 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.
  16. 16. 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
  17. 17. POLICY FRAMEWORK OF THE GOVERNMENT 1-SWOT analysis of industry 2-Liberalisation of sick unit
  18. 18. 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
  19. 19. 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)
  20. 20. •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.
  21. 21. 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
  22. 22. -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.
  23. 23. 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.
  24. 24. 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.
  25. 25. -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.
  26. 26. 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”

×