Industrial sickness is essentially a managerial failure. Discuss the statement referring to some managerial decisions.

Industrial sickness is essentially a managerial failure. Discuss the statement referring to some managerial decisions.

We shall now focus our attention on the factors in the non –SSI sector first, and then on the SSI sector.
Non-SSI Sector: The factors responsible for industrial sickness can be divided into two categories:
Exogenous factors and Endogenous factors.
Some of the exogenous factors relate to such factors as government policies pertaining to
Production, prices and distribution. Change in the investment pattern following new
priorities in the plans I yet another factor. Further, shortage of power, transport, raw
materials, deteriorating industrial relations as some other factors to be noted in this
connection. Such factors are likely to affect all units in an industry. These factors may
cause sickness of the industry. If state policy is the cause of sickness, then corrective
action should be taken at the government policy level. An illuminating example of
government policy causing industrial sickness is the controlled cloth scheme. Another is the administered coal prices before nationalisation of coal mines.
The most important endogenous factor causing industrial sickness has been weak management or mismanagement. In a large number of units, sickness was caused by bad management. In a highly protective environment (prior to 1991’s new economic policy), many persons with no managerial abilities entered the field and set up industrial enterprises. Some of them indulged in malpractices. Some took a short-sighted view of development and concentrated on making quick money. Many managers found it easy to meet their cash loses through borrowed capital, rather than through efficiency improvements. In a significant number of cases, sickness has resulted from managerial failure to adapt the production pattern and methods to the changing market conditions. Not much was done to replace the obsolete machinery or to upgrade technology. In the absence of favorable atmosphere (incentives, competition etc.), quite a number of managers preferred their units to go sick. Some did so to seek financial help from the government. According to Mr. Prem kumar Jha (“To Nationalise or not to Nationalise”, The Illustrated Weekly of India, February 18,1979), “In fact as 4the take-over of sick units and textile mills has shown in every case what the Government has inherited is a load of worn-out machinery, a mountain of debts and a distraught workforce. Nationalisation in such circumstances has become a means of indemnifying the entrepreneur against the consequences of his misdeeds instead of punishing him – first he milks an enterprise dry, then hands it over to the government for salvage.”
George Fernandes makes a similar assessment when he says “I do not want the Government to be a scavanger for the private sector. Look at the National Textile Corporation. The NTC today has 111 textile mills. They were taken over after the private sector sucked them dry of all their money and abandoned them and 1,50,000 workers employed in them to their fate. In the Buter, Gresham and Gravan and other Engineering units takes over the Government after similar mismanagement.
Managerial faults and failures thus contributed a lot towards industrial sickness.
Other endogenous factors may be summarily stated as follows:
- Diversion of funds
- Wrong dividend policy
- Excessive overheads
- Lack o sufficient provision for depreciation
- Overestimation of demand, and
- Bad planning.