Sick Industrial Companies Act (SICA):-
Sick industrial unit is defined as a unit or a company (having been in existence for not less than five years) which is found at the end of any financial year to have incurred accumulated losses equal to or exceeding its entire net worth. *
An industrial unit is also regarded as potentially sick or weak unit if at the end of any financial year; it has accumulated losses equal to or exceeding 50 per cent of its average net worth during four year immediately preceding such financial year. * Industrial Sickness in India:-
* Industrial sickness especially in small-scale Industry has been always a demerit for the Indian economy. * 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. * This position also remains same in the next decades. At the end of year 1986.
* Causes of industrial sickness:-
The two basic factors which may result in sickness of an industrial unit are:- *
Internal factors:- are those which arise within an organization. *
External factors:- are those which take place outside an organization.
* Internal Factors:-
Mismanagement in various functional areas of a company like finance, production, marketing and personnel. *
Wrong location of a unit.
Overestimation of demand and wrong dividend policy.
Poor implementation of projects which may be due to improper planning or managerial inefficiency. *
Poor inventory management in respect of finished goods as well as inputs. *
Failure to modernize the productive apparatus, change the product mix and other elements of marketing mix to suit the changing environment. *
Poor labour-management relationship and associated low workers' morale and low productivity, strikes, lockouts, etc. *
Unwarranted expansion and diversion of resources such as personal extravagances, excessive overheads, acquisition of unproductive fixed assets, etc. * External Factors:-
* Energy crisis arising out of power cuts or shortage of coal or oil. * Failure to achieve optimum capacity due to shortage of raw materials as a result of production set-backs in the supply industries, poor agricultural output because of natural reasons, changes in the import conditions, etc. * Infrastructural problems like transport bottlenecks.
* Credit squeeze.
* Situations like market recession, changes in technology, etc. * International pressures or circumstances, etc.
* Consequences of Industrial Sickness:-
* It leads to loss of substantial revenue to the Government and enhances its public expenditure. * It locks up necessary resources and funds in the sick unit. This also increases the non-performing assets (NPAs) of banks and financial institutions. * It leads to loss of production and productivity in the economy. * It aggravates the problem of unemployment in the economy. * It vitiates the industrial atmosphere and leads to worker-management disputes, strikes, lock-outs, etc. * It undermines the public confidence in the functioning of the organized sector in the country which in turn affects the overall investment climate of the economy. * Sick industrial companies act:-
* The Government has been taking many steps and remedial measures in order to tackle this problem in India. * The most significant measure has been the enactment of the Sick Industrial Companies (Special Provisions) Act,1985 (SICA). * It applies to industrial undertakings both in the public and private sectors. * The basic rationale of enacting SICA was to determine sickness in the industrial units. * It also aimed at expediting the revival of potentially viable units so as to make the investments in such units profitable. * To ensure the closure of unviable units so as to release the...
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