Industrial sickness refers to the condition of an industrial unit that is unable to support itself through internal resources and is forced to depend on external sources of funds for its long-term survival. The Reserve Bank of India has defined a sick unit as one that has reported cash loss for the last year of its operation and is likely to incur cash loss for the current year as well as the following year. The government has laid down guidelines to deal with the problem of industrial sickness. These guidelines provide a policy framework for administrative ministries of the Central Government, State Governments, and financial institutions.
The causes of industrial sickness can be classified into two broad categories: external and internal. External causes are those beyond the control of management and include factors such as delays in land acquisition, obtaining financial assistance, or supply of machinery. Internal causes are those related to management and include factors such as promotional, managerial, technical, financial, and political issues.
To address industrial sickness, the government provides liberal policies, financial assistance from banks and other institutions, exemptions from taxes, and other suitable remedies for sick industries.
Features of Government policy in relation to industrial sickness
Government policies in relation to industrial sickness primarily aim to address and mitigate challenges faced by industries that are facing financial distress or operational difficulties. These policies typically include the following main features:
Financial Assistance: Governments may provide financial assistance or relief measures to distressed industries to help them overcome short-term financial difficulties. This assistance could come in the form of grants, subsidies, or loans at concessional interest rates.
Rehabilitation and Restructuring: Industrial sickness policies often focus on rehabilitating and restructuring sick industries to make them financially viable in the long term. This may involve debt restructuring, changes in management, or technological upgrades to improve efficiency and competitiveness.
Debt Relief and Debt Recovery: Governments may intervene to facilitate the resolution of outstanding debts owed by sick industries. This can involve negotiations with creditors, including banks and financial institutions, to arrive at a reasonable repayment plan or debt write-offs in certain cases.
Legal Framework: Governments may establish a legal framework to deal with industrial sickness cases, including the creation of specialized tribunals or boards to oversee the resolution process. This framework may also include provisions for the takeover or sale of assets in extreme cases.
Monitoring and Assessment: Regular monitoring and assessment of the financial health of industries is a key feature of government policies. Early detection of distress allows for timely intervention and preventive measures.
Skill Development and Training: To enhance the competitiveness of the workforce, governments may offer training and skill development programs to employees in distressed industries, helping them adapt to changing market conditions.
Industrial Health Clinics: Some governments establish industrial health clinics or counseling centers to provide guidance and support to sick industries. These centers may offer expertise in financial management, operations, and strategic planning.
Promotion of Sustainable Practices: Policies may encourage sick industries to adopt environmentally sustainable practices and technologies as part of their rehabilitation efforts.
Incentives for Revival: Governments may offer incentives, such as tax benefits or preferential treatment, to investors or organizations willing to take over or invest in sick industries to facilitate their revival.
Transparency and Accountability: Transparency and accountability in the implementation of policies are crucial. Governments often require regular reporting and compliance with specified conditions by industries receiving assistance.
Industrial Sickness
Industrial sickness refers to the condition of an industrial unit that is unable to support itself through internal resources and is forced to depend on external sources of funds for its long-term survival. The Reserve Bank of India has defined a sick unit as one that has reported cash loss for the last year of its operation and is likely to incur cash loss for the current year as well as the following year. The government has laid down guidelines to deal with the problem of industrial sickness. These guidelines provide a policy framework for administrative ministries of the Central Government, State Governments, and financial institutions.
The causes of industrial sickness can be classified into two broad categories: external and internal. External causes are those beyond the control of management and include factors such as delays in land acquisition, obtaining financial assistance, or supply of machinery. Internal causes are those related to management and include factors such as promotional, managerial, technical, financial, and political issues.
To address industrial sickness, the government provides liberal policies, financial assistance from banks and other institutions, exemptions from taxes, and other suitable remedies for sick industries.
Features of Government policy in relation to industrial sickness
Government policies in relation to industrial sickness primarily aim to address and mitigate challenges faced by industries that are facing financial distress or operational difficulties. These policies typically include the following main features: