Sickness in small scale industries

Sickness in small scale industries

1. SICKNESS IN SMALL SCALE INDUSTRIES 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. Symptoms of Industrial sickness 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. Causes of sickness in small scale industry 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. Consequences of sickness 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. Remedial measures to overcome Sickness  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.

8. Thank you