Sickness in small scale industries

1. Lakshmi Mohan

2. Industrial sickness is defined all over the world as "an
industrial company 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"

3.  Decline in capacity utilization
 Shortages of liquid funds to meet short-term financial
obligation
 Non submission of data to banks and financial institutions
 Irregularity in maintaining bank accounts
 Frequent breakdowns in plants and equipment
 Decline in quantity of product manufactured or service
rendered
 Delay or default in the payment of statutory dues such as
provident fund, sales tax, excise duty etc.
 Decline in technical deficiency
 Frequent turnover of personnel in the industry

4. Internal causes for sickness:-
a) Lack of finance: Weak equity base, poor utilization of assets, inefficient working capital
management, absence of costing & pricing, absence of planning and budgeting and
inappropriate utilization or diversion of funds.
b) Bad Production Policies :Wrong selection of site which is related to production,
inappropriate plant & machinery, bad maintenance of Plant & Machinery, lack of quality
control, lack of standard research & development.
c) Marketing and Sickness : Wrong demand forecasting, selection of inappropriate product
mix, absence of product planning, wrong market research methods, and bad sales
promotions.
d) Inappropriate Personnel Management: bad wages and salary administration, bad labour
relations, lack of behavioural approach causes dissatisfaction among the employees and
workers.
e) Ineffective Corporate Management: Bad corporate management which includes
improper corporate planning, lack of integrity in top management, lack of coordination and
control etc.

5. External causes for sickness:-
a) Personnel Constraint: Non availability of skilled labour or
manpower wages disparity in similar industry and general labour
invested in the area.
b) Marketing Constraints: Liberal licensing policies, restrain of
purchase by bulk purchasers, changes in global marketing scenario,
excessive tax policies by govt. and market recession.
c) Production Constraints: Shortage of raw material, shortage of
power, fuel and high prices, import-export restrictions.
d) Finance Constraints: Credit restrains policy, delay in disbursement
of loan by govt., unfavorable investments, fear of nationalization.

6.  Huge financial losses to the banks and the financial institutions
 Loss to employment opportunities
 Adverse effect on prospective investors and entrepreneurs
 Wastage of scarce resources
 Loss of revenue to the Government

7.  Identifying sickness at initial stage : Identification and detection of the sickness
at incipient stage is the first and foremost measure to detect and reduce industrial
sickness
 Improving Infrastructure : Infrastructure facilities can be improved by setting
up industrial estates, Common testing centres etc.
 Technology Up-gradation : Funds may be provided by the financial institutions for
adoption of advanced technology.
 Marketing assistance : Government and Non Government Organizations (N.G.Os)
can come forward for marketing the goods produced by the SSI sector.
 Government Interventions : Periodic review of financial statements by
government can help to identify and prevent sickness at initial stage.
 Training : A proper environment must be created where an entrepreneur will be
educated and will have a proper knowledge, skill and experience about internal
and external environment of business to compete with large-scale industries and
multinational companies.