industrial sickness in Indian Small Industry”


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 is growing at an annual rate of about 28% and 13% respectively in terms of number of units and out standing number of bank credit. It is reckoned that as of today there are more than 2 lakhs sick units with an outstanding bank credit of over Rs7000crore nearly 29000 units are added to sick list every year. 

Industrial sickness especially 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.

Causes of sickness of ssi's 

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: 

We can say 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.

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.

REASONS FOR SICKNESS IN SSI’s             

Production Related Reasons:

  • Faulty Product Mix
  • Acklog of Production
  • Poor Quality of end product
  • Delayed delivery schedule

Financial Reasons:

  • Low Profitability
  • Low fund generation
  • Poor liquidity
  • Step Cost structure
  • Lack of financial resources
  • Lack of credit facility
  • Faulty credit utilization
  • Low share value

Market Reasons:

  • Poor marketing strategy
  • Imbalance between production & marketing
  • Wild market shifts
  • Lack of awareness of consumer’s preferences
  • Lack of specific market segmentation
  • Poor distribution network
Poor market performance 

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