REHABILITATION MEASURES OF SICK MSMEs

REHABILITATION MEASURES OF SICK MSMEs

The industrial sickness observed in the units spread to lack of adequate infrastructure facilities, skilled manpower and inputs like raw materials, power, fuel etc. Certain rehabilitation measures are identified which are essential to fight industrial sickness. Rehabilitation implies a remedy meant for industrial units which have already become sick and are on the verge of virtual collapse.

REHABILITATION MEASURES:  Some of the rehabilitation measures initiated by Reserve Bank of India (RBI) and some of them are initiated by Government of India.

  • SCHEMES OF GOVERNMENT: – There are certain schemes adopted by government of India. They are:

State Governments Following schemes can be undertaken:

  • Sales tax loans can be provided.
  • Preferential treatment to sick units for power supply.
  • Guarantee should be available where needed for fresh advances.
  • Exemptions from sales tax and other levies.
  • Speedy disposal industrial disputes.
  • Adequate market support should be provided.
  • Provide adequate budgetary support.
  • Penal levies in respect of sick units should be waived.
  • Price preference in the matter of purchases
  • Provide equity distribution.

-Central Government:-

  • Exemption from Central excise, wholly or partly.
  • Income tax relief should be provided.
  • Deferment of provident fund/waiver of penalties, income tax and employees’ insurance dues.
  • Exemption from payment of minimum bonus.
  • Provide budgetary support.
  • Provide marketing support.
  • Reserve certain quota for purchases by Government.
  • Changes suggested by RBI:-

 

  • Waiver of penal Interest: Waiver of penal Interest from the beginning of the accounting year of the unit in which it started incurring cash losses continuously. The following words may be added “the date of the account becoming NPA, whichever is earlier.”
  • Rate of interest: – Interest may be made overlapped or increase rapidly.
  • Repayment period: – Overlapping or increasing rapidly repayment may also be permitted so that the instalments are aligned to the cash flows.
  • Margin on funding of losses: – While funding past and future losses, margin of 40% may be prescribed in case of small and medium enterprises.

CONCLUSION: – There are numerous issues relating to rehabilitation. Firstly, there is wide spread sickness in the sector. Nearly, 99 % of the total sick units in the industrial sector in the country are from the SSI sector. Further, 22 % of the total bank credit is blocked in these SSI units. It is disheartening to note that the percentage of the number of sick units in the sector has declined from 11.34 in 1991 to 6.1 in 1999. This indicates that banks have given less preference to rehabilitation of sick units in the SSI sector though sickness on the rise. Further, the number of sick units being found viable is also negligible. Hence, there is a major challenge before banks as to how to strengthen rehabilitation. Towards this end, there is a felt need to carry out a detailed study of sick units in the sector. In particular, it is appropriate to draw lessons from both successful as well as failed cases in rehabilitation.

Leave a Reply

Your email address will not be published. Required fields are marked *