Industrial Sickness | Remedies measure for Industrial Sickness
Industrial sickness refers to the uneconomical performance of industrial entities. It reflects poor functioning of business operations and suggests that something has seriously gone wrong with the usual business running. As the term indicates, industrial sickness is related with industrial/ production/ manufacturing units of large, medium and small scale businesses. Similar to the sickness of human body, industrial sickness also has its own causes, symptoms, consequences as well as remedies.
An industrial unit suffering from industrial sickness can be defined as any such entity which has been incurring continuous losses for more than five years, and such losses amount to more than the total net worth of this entity. Such entity may have also suffered losses in the current and previous financial year. A sick unit may not work to its full capacity, may not earn reasonable profit, may not pay fair wages and dividends and may face financial, marketing and other problems in a continuous manner.
Remedial to overcome for Industrial Sickness
The measures to overcome industrial sickness or remedies of industrial sickness are enlisted below :
- Effective Planning
- Identifying sickness at initial stage
- Financial Assistance
- Improving Infrastructure
- Technology Up-gradation
- Marketing assistance
- Government Intervention
- Effective Planning : It is essential for every small and medium sized enterprise to conduct in-depth survey of prevailing circumstances in small scale sector and productive programmes. Only a small number of entrepreneurs initiate their operations based on an accurate and diligent plan. Thus, effective planning is essential as all small entrepreneurs require a detailed project report or an all-inclusive feasibility study to start their units. Absence of such a planning can affect entrepreneurs with issues like inappropriate technology, under-estimation of costs, unsuitable location, unqualified or inexpert consultancy service, etc. Hence, it is indispensable for SMEs to launch effective action plans for their sustenance.
- Identifying sickness at initial stage- Industrial sickness is not an overnight occurrence but it is a gradual process taking from 5 to 7 years Corroding the health of a unit beyond cure. Therefore, the identification and detection of sickness at the incipient stage is the first and foremost measure to detect and reduce industrial sickness. It will not be less than correct to argue that delayed identification of sickness could have been mainly responsible for such high proportion of non-viable units among the identified sick units.
- Financial Assistance -For avoiding industrial sickness, firms and industries should arrange adequate credit for running their business efficiently. There are many small and medium sized firms which are incompetent to obtain proper financial support from banks and other funding agencies, they primarily depend more on owned funds and funds borrowed from non banking sector. However, SEBI has devised guidelines and directives for venture capital and better finance facility is expected for this sector. Moreover, lending schemes offered by priority sector should be made more wide-ranging and general credit with improved limit.
- Improving Infrastructure- Firms require many important facilities to ensure smooth. functioning of its operations such as finance,, water supply, power arrangement, etc. These facilities are extended by small industries corporation. State technical consultancy organisations and State Development Corporation. However, their support system requires more improvement. Evolution of industrial estates has resolved this problem partly, yet more efforts are necessary to establish more industrial estates to accommodate more small units.
- Technology Up-gradation -With the advent of technological advancements, firms must attempt. to upgrade their process of production. They must adopt the latest technology for producing goods/ services. Under the following circumstances, government consultancy organisations and laboratories play a crucial role. As small firms are incompetent to spend money on the latest technologies, government should arrange practical and modern methods of production for them. If financially possible, firms should also invest in their research and development activities. They should always strive for constant innovation for leading the market and sustaining in globalized business environment.
- Marketing assistance- Every firm must emphasize on their market, brand and product development. They must strive to persist in the market by paying exceptional significance on quality enhancement programme. Offering products at cheaper rates and transmitting the benefits to consumers would be advantageous in the long-run to raise their marketing performance. Marketing the products of small units by charging a very high price from the customers enables large companies to earn substantial profits. Thus, firms should adopt effective marketing strategies to overcome industrial sickness.
- Liquidation -In view of limited resources at the disposal, a large number of sick units may have to be permitted to close/liquidate; a fewer number of sick units may be picked up for revival/rehabilitation and a larger number of weak units may be combined together to prevent sickness. The time has come to substitute the old adage that what cannot be cured has to be endured’ by ‘what cannot be cured should be ended. However, merger of a large number of sick units will be a welcome proposition only when complete social security for labours displaced due to unit closure is prevalent in the society.
- Government Intervention- In order to arrest sickness, at the incipient stage, banks and financial institutions should periodically review the accounts of small-scale industries borrowers to identify units which are becoming sick or are prone to sickness. The Government of India and the Reserve Bank of India should be requested to direct commercial banks and financial institutions to provide information on sickness to the agencies like BIFR implementing the rehabilitation programs to facilitate them to take appropriate action.
- Training — A proper environment must be created where an entrepreneur will be educated and will have a proper knowledge, Skill & experience about internal & external environment of business to compete with large Scale industries and multinational companies. Industries must make coordinated efforts in bestowing formal training and education to workers involved in this sector as they are the real profitable asset of the industry. Firms should consider the expenses incurred on training and educational activities as investments for ensuring long-term of the growth business. Expertise and skills essential in the dynamic business environment should be provided by the Small Industries Association. Further, in order to compete with medium and large-scale competitors, small firms should motivate their workers by providing motivation and offering rewards.
- Rehabilitation -The process of returning to a healthy or good way of business rescheduling of debts, sanction of additional term loans for installation of new machineries, enhancement of working capital limit, etc. However, other problems like managerial, marketing, power and raw material are equally important which remain unattended to in the rehabilitation program. The need is, therefore, to provide for managerial efficiency, marketability of products, adequate availability of power and raw material in the rehabilitation programmes.
Industrial sickness is a significant problem in many market economies, more so even in the case of Indian economy. The sickness in small scale enterprises is very much looming and large as compared to medium and big industries. The cause for sickness is lack of demand and shortage of working capital were responsible for the magnitude of sickness in both registered MSME sector and unregistered MSME section Further, analysis also reveals that the tendency of sickness is at declining end over the years, however, the amount involved or locked up in the units is on the increasing