Ssi Problems

7/28/2019 Ssi Problems

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Definition of a sick unit is given by SickIndustrial companies act, 1985. According to theact " The sick industrial company is a company

which has at the end of any financial year

accumulated losses equal to or excluding itsentire net worth and has also suffered cash lossesin that financial year and in the financial year

immediately preceding it."


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Industrial sickness is growing at an annual rate ofabout 28% and 13% respectively in terms ofnumber of units and out standing number of bankcredit. It is reckoned that as of today there are

more than 2 lakhs sick units with an outstandingbank credit of over Rs7000crore nearly 29000 unitsare added to sick list every year.

Industrial sickness especially in small-scaleIndustry has been always a demerit for the Indian

economy, because more and more industries like

cotton, Jute, Sugar, Textile small steel andengineering industries are being affected by thissickness problem.


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Internal Cause for sickness: We can say pertaining to the factors which are within the control of

management. This sickness arises due to internal disorder in the areasjustified as following:

a) Lack of Finance: This including weak equity base, poor utilization ofassets, inefficient working capital management, absence of costing &

pricing, absence of planning and budgeting and inappropriate utilizationor diversion of funds. b) Bad Production Policies : The another very important reason for

sickness is 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 and soon.

c) Marketing and Sickness: This is another part which always affects thehea

lth of any sector as well as SSI. This including wrong demandforecasting, selection of inappropriate product mix, absence of productplanning, wrong market research methods, and bad sales promotions.


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d) Inappropriate Personnel Management: Theanother internal reason for the sickness of SSIs isinappropriate personnel management policies

which includes bad wages and salaryadministration, bad labour relations, lack ofbehavioral approach causes dissatisfaction amongthe employees and workers.

e) Ineffective Corporate Management: Anotherreason for the sickness of SSIs is ineffective or badcorporate management which includes impropercorporate planning, lack of integrity in topmanagement, lack of coordination and control etc.


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a) Personnel Constraint: The first for most important reason for the sicknessof small scale industries are non availability of skilled labour ormanpower wages disparity in similar industry and general labourinvested in the area.

b) Marketing Constraints: The second cause for the sickness is related to

marketing. The sickness arrives due to liberal licensing policies, restrainof purchase by bulk purchasers, changes in global marketing scenario,excessive tax policies by govt. and market recession.

c) Production Constraints: This is another reason for the sickness whichcomes under external cause of sickness. This arises due to shortage ofraw material, shortage of power, fuel and high prices, import-exportrestrictions.

d) Finance Constraints: another external cause for the sickness of SSIs is lackof finance. This arises due to credit restrains policy, delay indisbursement of loan by govt., unfavorable investments, fear ofnationalization.


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1.Production Related Reasons:Faulty Product MixPoor Quality of end productDelayed delivery schedule

2.Financial Reasons:Low ProfitabilityLow fund generationPoor liquidityStep Cost structure

Lack of financial resourcesLack of credit facilityFaulty credit utilizationLow share value


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Continuous irregularity in cash credit accounts ; Low capacity utilization; profit fluctuations, downward sales and fall in profits followed by

contraction in the share market;

Failure to pay statutory liabilities; Larger and longer outstanding in the bills accounts; Non submission of periodical financial data /stock statement etc.

in time; financing capital expenditure out of funds provided for working

capital purposes; Rapid turn over of key personnel; Existence of large no. of law suits against a company; Rapid expansion and too much diversification within a short time; Any major change in the share holdings.


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Majority of sick units is retrievable in order to tackle theproblem of sickness from the two angles the role of threeagencies assumes significance: a) The government b)Financial institutions and the industry associationsa) The Role of Government: If the number of units in the

country has increased some 10 times since independenceand if we have diversified industrial structure with widespread entrepreneurship the credit for this largely belongsto government.Second area where the government can be helpful is Vis--vis industrial licensing. The very existence of licensing and

monopoly regulation legislation implies that there is astampede to "to get in" when ever licensing is liberalized foran industry or an economy as a whole


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b) The Role Of Financial Institutions: The following are the ways bywhich sickness can be prevented by financial institutions :

a) Continuous monitoring of unitb) Careful project appraisal

c) Professional institutional response to unit's problemsd) Required systems at client unitse) Incentives to units to remain healthyc) The Role Of Indutry Associations : A good practical review by

each industry association of installed and usable capacity in the

industry , capacity utilization , growth trends , problems etcshould be useful 4 the potential new entrants 4 deciding whether 2enter the industry or not. The industry can have some sort of 1staid cell this could consist of professionals who could go to the aidof a unit that is beginning to fall with the offer of managerial andtechnical help also.


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Direct Financial AssistanceFor the development of Industrial infrastructure forSSIs

* Venture capital/development scheme

* Equipment Finance Scheme* Integrated Infrastructural Development Scheme* Project Finance Scheme* Schemes related to Marketing of SSI's Product* ISO 9000 Scheme* Micro credit financing scheme

* Short term & long term loan schemes* Direct Discounting of bill* TDMF Schemes* Factoring scheme* Pre & Post shipment financial assistance scheme* Export bill financing scheme & so on


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Indirect Finance by SIDBI

Refinance Assistancea) Composite loan scheme for cottage, Village & tinyIndustries

b) Scheme for women entrepreneurs Mahila Udyam

Nidhi

c) Single window scheme

d) Scheme for SRTOe) Scheme for SC/ST & Physically Challenged

f) Other General Schemes etc


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II) Scheme for Rediscounting of bills

a) For equipmentsb) For Inland supply bills

III) Other support through various institutions

a) NSIC, MSME ,SIDO ,Bank to Intermediaries

b) To leasing / hire purchase companies.c) To factoring companiesd) To special corporate entities and institutionswhich are engaged in the business of development

of SSIs


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SECTORAL APPRAISAL In general we can say that the small scale sector of

India has grown slowly and occupied the very

important position in the Indian economy.

The small scale sector is providing employment to therural unemployment to the rural unemployed people.

The small scale sector is also playing significant role bytheir contribution to the socio-economic objectivewhich is related to the:

employment generation Output

Export &

Fostering Entrepreneurship

It is well to say that the small scale sectors account foraround 90% of the industrial units in the country andnear by 1/3 of nations export.


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In conclusion we can say that the SIDBI, by the

mode of refinancing, discounting andrediscounting as well as financial assistance.

Expansion of small scale sector and increase its

share in industrial output. Development of rural areas where more than

70% of the population resides.*Increase the efficiency of SSIs.

* Increase the contribution of SSIs in export.* More employment generation in rural areas ofrural India.


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THANK YOU

By:ISRAR AHMADRIYAN ALI

MOTASHIM BILLA

MOHD TABISH

Ssi Problems

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