Wednesday, May 18, 2011

Explain the factors responsible for industrial sickness and measures to tackle them in Small Scale Industries Sector (SSI)

Explain the factors responsible for industrial sickness and measures to tackle them in Small Scale Industries Sector (SSI)

It is a real fact that more than 70% of Indian population resides in rural areas of our country. But the majority of that population is still backward due to less support of external environment. The quoted quote that "wheel is the symbol of development" is proven false in case of Rural India because there is lack of development which may be because of unfair political environment and government negligence. SIDBI is an apex financial institution which provides financial support to the sick / small scale industries. So, we can say that SIDBI is the institution which engaged in the business of rural industrialization in India.
The small Industries Development Bank of India is Principal Financial institution engaged in development initiative in rural sector and improving the SSI unit. The another very important role is keeping by this Bank is that it is also encouraging SSIS and generating employment in rural India. The Bank also performing the rehabilitation duty and improving the performance of small Industries.
Industrial sickness specially in small-scale Industry has been always a demerit for the Indian economy, because more and more industries like – cotton, Jute, Sugar, Textile small steel and engineering industries are being affected by this sickness problem. As per an estimate 300 units in the medium and large scale sector were either closed or were on the stage of closing in the year 1976. About 10% of 4 lakhs unit were also reported to be ailing. And this position also remain same in the next decades. At the end of year 1986, the member of sick units in the portfolio of scheduled commercial banks stood at 1.47,740 involving an out standing bank credit of Rs. 4874 crores.
• Where the total number of large Industries which are sick were 637 units at the end of year 1985 increased to 714 units in the end of next year 1986.
• Likewise on the other hand the number of sick small scale units were also increased 1.18 lacks at the end of 1985 to 1.46 lakhs at the end of 1986.
• The bank amount which was outstanding in case of large industries for the same period also increased from Rs.2,900 crores to Rs. 3287 crores at the end of year 1986
• Dues of Small Scale sector also increased from Rs.1071 crores to Rs.1306 at the end of the year 1986.
• Of the 147, 740 sick industrial units which contains large medium as well as small scale involving the total bank loan (credit) of Rs. 4874 at the end of the year 1986.
Most of the Indian authors and researchers have classified the different types of industrial sickness under two important categories. They are:
1) Internal Cause for sickness: Pertaining to the factors which are within the control of management. This sickness arises due to internal disorder in the areas justified as following:
a) Lack of Finance: This including 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 : 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 so on.
c) Marketing and Sickness : This is another part which always affects the health of any sector as well as SSI. This including wrong demand forecasting, selection of inappropriate product mix, absence of product planning, wrong market research methods, and bad sales promotions.
d) Inappropriate Personnel Management: The another internal reason for the sickness of SSIs is inappropriate personnel management policies which includes bad wages and salary administration, bad labour relations, lack of behavioural approach causes dissatisfaction among the employees and workers.
e) Ineffective Corporate Management: Another reason for the sickness of SSIs is ineffective or bad corporate management which includes improper corporate planning, lack of integrity in top management, lack of coordination and control etc.
2) External causes for sickness:
a) Personnel Constraint: The first for most important reason for the sickness of small scale industries are non availability of skilled labour or manpower wages disparity in similar industry and general labour invested in the area.
b) Marketing Constraints: The second cause for the sickness is related to marketing. The sickness arrives due to 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: This is another reason for the sickness which comes under external cause of sickness. This arises due to shortage of raw material, shortage of power, fuel and high prices, import-export restrictions.
d) Finance Constraints: Another external cause for the sickness of SSIs is lack of finance. This arises due to credit restrains policy, delay in disbursement of loan by govt., unfavorable investments, fear of nationalization.
A) Direct Financial Assistances
For the development of Industrial infrastructure for SSIs
• 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
B) Indirect Finance by SIDBI
I) Refinance Assistance
a) Composite loan scheme for cottage, Village & tiny Industries
b) Scheme for women entrepreneurs Mahila Udyam Nidhi
c) SEMFEX Scheme
d) Single window scheme
e) RTDM Scheme
f) RISO-9000 Scheme
g) NEF Scheme
h) RSR Scheme
i) Scheme for SRTOs
j) Scheme for ST/SC & Physically Challenged
k) Other General Schemes
II) Scheme for Rediscounting of bills
a) For equipments
b) For Inland supply bills
III) Other support through various institutions
a) SFC's, SIDC, SSIDC, Bank to Intermediacies
b) To leasing / hire purchase companies.
c) To factoring companies
d) To special corporate entities and institutions which are engaged in the business of development of SSIs

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