Industrial Sickness - Prevention and Remedies

This presentation talks about how industrial sickness could be prevented and what remedies could be adopted to cure industrial sickness.

1. Presented BY- ASHUTOSH CHAUDHARY PIYUSH CHANDRA SemESTER III (MBA – M52) MONIRBA, University of Allahabad INDUSTRIAL SICKNESS PREVENTION AND REMEDIES

2. CONTENT OVERVIEW PREVENTION REMEDIES CONCLUSION

3. OVERVIEW According to Industrial 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

4. PREVENTION Proper project planning • Location of project •Availability of raw material •Availability of labor & technical staff •Availability of finance at reasonable rates. Proper Market Analysis •Demand forecasting •Study of opportunities & threats of environment • Consumer tastes & preferences •Availability of reliable distributors

5. PREVENTION Prevention of Sickness by Owners and Management As prevention of sickness is concerned, the essentials are obvious: competent management of various functions like general management, marketing, operations, personnel, and finance; and a good performance reporting System designed to provide top management/owners timely information on critical parameters such as sales, production, profits, cost variance, profit variance, etc.

6. SUGGESTED REMEDIES  The effective measures which may be taken for revival of sick units are technical help, professional counseling and improved manage­ment. Also, the role of professionals and experi­enced management becomes more important in times of sickness. Steps taken by banks. giving adequate working capital when there is a shortage. recovery of interest reduced rate. defining the special cell in the RBI. arrange the special committee of state level in the local branch for link between financial institution and government agency.

7. SUGGESTED REMEDIES The Sick Industrial Companies (Special Pro­visions) Bill, 1997, passed by Lok Sabha , introduced encouraging changes. It suggested that a time bound procedure was to be adopted within which the scheme has to be sanctioned and BIFR would play the role of a mediator and not a court. The industrial investment bank of India - set up the IRCI (industrial reconstruction corporation of India.) - convert IRCI into IRBI in March 20 ,1985 - convert IRBI into IIBI in march 27, 1997

8. SUGGESTED REMEDIES Technical obsolescence and financial mis­management are also important factors that lead to industrial sickness. As per the new provisions, an opportunity will be given to get an unanimous consent to a scheme from all concerned, failing which secured creditors will attempt to form a scheme and, if all this fails, the undertaking would be sold off. Only if it is not possible to do that, the BIFR(Board of Industrial And Finance Reconstruction) may order winding up of the company.

9. CONCLUSION Industrial sickness is a significant problem in many market economies, more so even in the case of Indian economy. The sickness in small scale enterprises is very much looming and large as compared to medium and big industries. The cause for industrial sickness is lack of demand and shortage of working capital were responsible for the magnitude of sickness in both registered MSME sector and unregistered MSME sector. Further, analysis also reveals that the tendency of sickness is at declining end over the years, however, the amount involved or locked up in the units is on the increasing end.

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