Remedial measures of of Industrial sickness - Problems of growth, Business Environment | Business Environment - B Com PDF Download

The growing incidence of sickness by size, region and industry followed by its far reaching socio-economic evil effects lends a strong realization of urgency to the solution of the sick industry problem in India: 

1. Industrial sickness is not an overnight occurrence but it is a gradual process taking from 5 to 7 years corroding the health of a unit beyond cure. Therefore, the identification and detection of sickness at the incipient stage is the first and foremost measure to detect and reduce industrial sickness.

It will not be less than correct to argue that delayed identification of sickness could have been mainly responsible for such high proportion of non-viable units among the identified sick units. For identifying sickness at an early stage, appropriate yardsticks need to be evolved and developed.

2. In view of limited resources at the disposal, a large number of sick units may have to be permitted to close/liquidate; a fewer number of sick units may be picked up for revival/rehabilitation and a larger number of weak units may be combined together to prevent sickness.

The time has come to substitute the old adage that ‘what cannot be cured has to be endured’ by ‘what cannot be cured should be ended’. However, merger of a large number of sick units will be a welcome proposition only when complete social security for labours displaced due to unit closure is prevalent in the society.

3. At present, the attitudes of three different sets of a unit-management, financial institutions and labour do not converge as they view the problems of industrial sickness quite differently. For example, management seeks freedom to close the unit if it feels it is no more viable. Financial institutions think that whatever can be salvaged should be salvaged.

Labour view is that in the event of the closure of the unit, they will lose job, provident fund and other benefits, therefore, the unit should continue production. Thus, all the three drag in different directions. But, if these diverse viewpoints could be properly integrated, their approach could be integrated and their interests could also be converged, the unit can be salvaged in the best interest of all the three.

4. It is a happy augury that now sick small-scale industries also fall within the purview of Board for Industrial and Financial Reconstruction (BIFR). It will be better to open a separate division in BIFR to deal with sickness in small-scale industries because small-scale industries are characterized by different sets of problems and prospects as compared to medium and large-scale industries.

5. It is found that the rehabilitation programmes for sick small units are often carried out in an adhoc and hap-hazardous manner. The rehabilitation packages provided to the sick units consist of only financial measures such as rescheduling of debts, sanction of additional term loans for installation of new machineries, enhancement of working capital limit, etc.

However, other problems like managerial, marketing, power and raw material are equally important which remain unattended to in the rehabilitation programmes. The need is, therefore, to provide for managerial efficiency, marketability of products, adequate availability of power and raw material in the rehabilitation programmes.

6. Having taken a decision to rehabilitate a sick unit, the programme should be finalized quickly and implemented speedily. Instances are many to suggest that any delay in these two matters aggravates the sickness position and revival becomes a distant goal. At the same time, the rehabilitation programmes need to be implemented in full as a piece-meal implemen­tation often jeopardizes the efforts to rehabilitate the unit.

For instance, if the need-based funds are not released in full, the unit may not be able enough to operate above the break-even point. As a result, the unit may continue incurring losses and the additional working funds may also be wiped out to meet such losses.

7. In order to arrest sickness, at the incipient stage, banks and financial institutions should periodically review the accounts of small-scale industries borrowers to identify units which are becoming sick or are prone to sickness.

The Government of India and the Reserve Bank of India should be requested to direct commercial banks and financial institutions to provide information on sickness to the agencies like BIFR implementing the rehabilitation programmes to facilitate them to take appropriate action.

8. Last but not the least; experiences indicate that many industrial units fall sick because of the improper opportunity scanning made by the entrepreneurs themselves. They start an industrial unit mainly to avail of subsidies, concessions and incentives from the Government. We know that a small-scale industry entrepreneur is like a one-man band. He/she may possess one or two or three ingredients/requisites but not the all.

To quote, an entrepreneur may have land, building, machinery etc. but had no experience in functional areas like production and marketing. Therefore, the necessity of the situation is to impart necessary knowledge to the entrepreneurs in various functional areas through the training programmes like Entrepreneurship Development Programmes (EDPs).