Definition of a sick unit is given
by Sick Industrial companies act, 1985. According to the act " The sick
industrial company is a company which has at the end of any financial year accumulated losses equal to or excluding its entire
net worth and has also suffered cash losses
in that financial year and in the financial year immediately preceding
it."
Extent of
sickness:
Industrial sickness especially in
small-scale Industry has been always a demerit for the Countries economy,
because more and more industries like - cotton, Jute, Sugar, Textile small steel and engineering industries are being
affected by this sickness problem.
Causes of
sickness:
Most of the economist and
researchers have classified the different types of industrial sickness under two important
categories. They are:
1) Internal Cause for sickness:
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 includes 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 Industries is inappropriate personnel management
policies which includes bad wages and salary
administration, bad labour
relations, lack of behavioral approach causes
dissatisfaction among the employees
and workers.
e) Ineffective Corporate Management: Another reason for
the sickness of Industries 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..
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 Industry
is lack of finance.
This arises due to credit restrains policy, delay in disbursement of loan by
govt.. unfavorable investments, fear of
nationalization._