SICKNESS IN SSI SECTOR

7.1

The prevalence of sickness in SSI sector has been a cause of concern for quite some time. The definition of sickness in SSI sector has been undergoing changes. The Reserve Bank of India (RBI) was instrumental in appointing Committees from time to time to look in to the issue of the Sickness affecting the Sector. The latest definition of Sickness given by the Working Group on Rehabilitation of Sick Units set up by the RBI (Kohli Committee) is given below.

"A small scale industrial unit is considered as sick when

  1. if any of the borrowal accounts of the unit remains substandard for more than six months, i.e., principal or interest, in respect of any of its borrowal accounts has remained overdue for a period exceeding one year will remain unchanged even if the present period for classification of an account as substandard is reduced in due course;

    OR

  2. There is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its net worth during the previous accounting year, and

  3. The unit has been in commercial production for at least two years."

CRITERIA TO IDENTIFY SICKNESS/ INCIPIENT SICKNESS

7.2

In order to measure sickness, information on, whether the unit has an outstanding loan, if so the source (s) of the loan (institutional/ non- institutional), whether there was delay in repayment of institutional loan for more than 12 months and whether there was erosion in the net worth to the extent of 50 per cent of the net worth during the previous accounting year, was collected in the Third Census. On the basis of this information, the definition given by the Kohli Committee was used to measure sickness. In order to measure incipient sickness, the continuous decline in gross output for three consecutive years was identified as a suitable indicator, and so information on whether there was continuous decline in gross output compared to the previous two financial years was also collected. Thus, the following criteria were adapted to identify sick/ incipient sick units in the Third Census.

  1. Continuous decline in gross output compared to the previous two financial years;

  2. Delay in repayment of institutional loan, for more than 12 months; and

  3. Erosion in the net worth to the extent of 50 per cent of the net worth during the previous accounting year.

7.3

Sickness/ incipient sickness being a leading question, the enumerators were asked to elicit reasons from the entrepreneurs of the units satisfying at least one of the above criteria, as to why their unit has not been running satisfactorily.

SICKNESS IN THE TOTAL SSI SECTOR

7.4

Using the definition of sick units given by Kohli Committee appointed by the RBI, i.e., number of units with erosion of net worth by more than 50 % or delay in repayment of institutional loan by more than 12 months, it was found in the Third Census that 1,04,769 units (1 %) were sick. The top five States in terms of number of sick units were West Bengal, Kerala, Maharashtra, Karnataka and Andhra Pradesh with a total share of 59.53 %.

7.5

Incipient sickness measured in terms of continuous decline in gross output over three consecutive years was of the order of 7,50,922 (7.14 %). The top five States in this category were Kerala, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra with a total share of 55.42 %.

7.6

Combining the three criteria, i.e., units with erosion of net worth by more than 50 % or delay in repayment of institutional loan by more than 12 months or continuous decline in gross output over three consecutive years, it was found that about 8,22,896 (7.82 %) units were suffering from sickness/ incipient sickness. The top five States were same as in the case of incipient sickness, viz., Kerala, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra with a total share of 54.28 %.

7.7

This being the overall scenario of sickness studied in respect of all the units in the sector, it is worth noting that RBI compiles information on sickness in respect of units borrowing loans from scheduled commercial banks. Limiting the universe to units having outstanding loan with institutional sources (4,78,404 in number), it was found that about 85,290 units (17.8 %) were sick. The top five States in this category were West Bengal, Kerala, Maharashtra, Karnataka and Chattisgarh with a total share of 64.07 %. The State-wise percentage distribution of sick/ incipient sick units on the basis of the above criteria is given in the following table.

TABLE 44: PERCENTAGE DISTRIBUTION OF SICK/ INCIPIENT SICK UNITS IN THE TOTAL SSI SECTOR, STATE-WISE

S. No.

Name of State/ UT

Sick units (where there is erosion of networth or delay in repaymentof instl. Loan)

Incipient sick units (continuousdecline in gross output)

Sick/ incipient sick units (erosion of networth or delay in repayment of instl. Loan or continuous decline in gross output

Sick units as per RBI criteria (among units with outstanding instl. loan where there is erosion of networth or delay in repayment of instl. Loan)

1.

JAMMU & KASHMIR

0.26

0.06

0.08

0.27

2.

HIMACHAL PRADESH

0.61

1.13

1.09

0.68

3.

PUNJAB

2.16

5.60

5.28

1.89

4.

CHANDIGARH

0.10

0.12

0.12

0.07

5.

UTTARANCHAL

0.15

0.96

0.89

0.11

6.

HARYANA

1.89

2.07

2.07

1.87

7.

DELHI

2.80

1.48

1.62

2.23

8.

RAJASTHAN

2.19

5.05

4.80

2.08

9.

UTTAR PRADESH

4.61

3.05

3.13

4.30

10.

BIHAR

1.85

2.50

2.50

1.89

11.

SIKKIM

0.02

0.01

0.01

0.01

12.

ARUNACHAL PRADESH

0.02

0.01

0.01

0.02

13.

NAGALAND

0.01

0.00

0.00

0.01

14.

MANIPUR

0.12

0.53

0.50

0.12

15.

MIZORAM

0.02

0.01

0.01

0.01

16.

TRIPURA

0.45

0.21

0.20

0.54

17.

MEGHALAYA

0.22

0.06

0.08

0.26

18.

ASSAM

1.23

1.01

1.02

0.98

19.

WEST BENGAL

15.96

5.71

6.92

18.28

20.

JHARKHAND

0.46

0.61

0.60

0.30

21.

ORISSA

4.11

2.33

2.42

4.04

22.

CHHATTISGARH

5.48

0.90

1.48

6.43

23.

MADHYA PRADESH

3.98

5.43

5.34

3.80

24.

GUJARAT

1.93

5.22

4.98

1.53

25.

DAMAN & DIU

0.07

0.02

0.02

0.05

26.

DADRA & NAGAR HAVELI

0.03

0.01

0.02

0.02

27.

MAHARASHTRA

13.70

6.62

7.31

14.17

28.

ANDHRA PRADESH

6.04

9.76

9.27

4.10

29.

KARNATAKA

9.20

9.03

9.07

9.90

30.

GOA

0.47

0.21

0.24

0.43

31.

LAKSHADWEEP

0.00

0.00

0.00

0.00

32.

KERALA

14.64

18.61

17.80

15.28

33.

TAMIL NADU

4.93

11.40

10.84

4.02

34.

PONDICHERRY

0.25

0.24

0.24

0.27

35.

ANDAMAN & NICOBAR ISLANDS

0.02

0.03

0.03

0.02

All India

100.00

100.00

100.00

100.00

SICK INDUSTRIES

7.8

The sick/ incipiently sick industries were identified in terms of economic activities (at 5-digit level of NIC-1998) in respect of the regd. SSI sector, unregd. SSI sector and the total SSI sector. It was found that 'Tailoring Services' was the worst affected activity in all the three. The following tables give details of the percentage distribution of sick/ incipiently sick industries in the top 20 economic activities in the regd., unregd. and the total SSI sectors, where bulk of the sick/ incipiently sick units were found.

TABLE 45: TOP 20 ECONOMIC ACTIVITIES IN TERMS OF SICK/ INCIPIENTLY SICK UNITS (PERCENTAGE)
IN THE REGD. SSI SECTOR

S.No.

NIC code

Sick units (where there is erosion of networth or delay in repayment of instl. Loan)

Incipient sick units (continuous decline in gross output)

Sick/ incipient sick units (erosion of networth or delay in repayment of instl. Loan or continuous decline in gross output)

Sick units as per RBI criteria(among units with outstanding instl. loan where there is erosion of networth or delay in repayment of instl. Loan)

1.

18105

5.21

9.01

8.66

5.37

2.

36101

4.35

4.15

4.40

4.44

3.

15311

2.67

4.24

4.13

2.73

4.

28111

3.68

3.27

3.50

3.95

5.

28920

2.74

3.37

3.40

2.71

6.

15312

3.11

2.92

3.10

3.29

7.

18101

2.85

2.81

2.92

2.81

8.

50200

1.39

2.47

2.37

1.41

9.

22219

2.00

2.22

2.26

1.98

10.

52605

2.64

1.84

2.14

2.67

11.

50404

1.35

2.15

2.10

1.20

12.

52602

1.37

1.86

1.87

1.24

13.

52603

1.48

1.83

1.86

1.41

14.

20101

1.51

1.57

1.64

1.58

15.

19201

1.56

1.54

1.62

1.53

16.

26960

1.86

1.27

1.43

1.99

17.

25209

1.68

1.10

1.25

1.65

18.

15142

1.29

1.18

1.25

1.34

19.

15314

0.55

1.23

1.16

0.55

20.

26931

1.42

0.91

1.05

1.49

Total

44.71

50.96

52.10

45.36

TABLE 46: TOP 20 ECONOMIC ACTIVITIES IN TERMS OF SICK/ INCIPIENTLY SICK UNITS (PERCENTAGE)
IN THE UNREGD. SSI SECTOR

S.No.

NIC code

Sick units (where there is erosion of networth or delay in repayment of instl. Loan)

Incipient sick units (continuous decline in gross output)

Sick/ incipient sick units (erosion of networth or delay in repayment of instl. Loan or continuous decline in gross output)

Sick units as per RBI criteria(among units with outstanding instl. loan where there is erosion of networth or delay in repayment of instl. Loan)

1.

18105

14.60

16.91

17.16

13.58

2.

64205

5.60

6.52

7.56

3.26

3.

36101

9.32

3.63

7.52

1.27

4.

15311

4.39

5.35

6.03

6.22

5.

52603

1.08

5.01

4.20

0.34

6.

52605

3.60

3.26

3.81

2.49

7.

18101

5.06

0.75

3.19

0.05

8.

52602

3.05

2.53

3.13

3.14

9.

28111

2.64

2.57

3.08

3.49

10.

15312

4.44

1.86

2.70

3.06

11.

74993

1.40

2.66

2.42

0.18

12.

93011

1.73

2.05

2.32

0.02

13.

50200

1.49

1.80

1.88

0.64

14.

50404

1.44

2.06

1.84

2.49

15.

15319

3.38

2.03

1.83

0.00

16.

20221

0.49

2.37

1.82

0.78

17.

15433

0.06

2.17

1.65

0.04

18.

74942

1.74

1.07

1.51

0.14

19.

52609

1.73

0.73

1.30

2.14

20.

26931

1.61

0.61

1.30

0.41

Total

68.85

65.96

76.28

43.75

TABLE 47 : TOP 20 ECONOMIC ACTIVITIES IN TERMS OF SICK/ INCIPIENTLY SICK UNITS (PERCENTAGE)
IN THE TOTAL SSI SECTOR

S.No.

NIC code

Sick units (where there is erosion of networth or delay in repayment of instl. Loan)

Incipient sick units (continuous decline in gross output)

Sick/ incipient sick units (erosion of networth or delay in repayment of instl. Loan or continuous decline in gross output)

Sick units as per RBI criteria(among units with outstanding instl. loan where there is erosion of networth or delay in repayment of instl. Loan)

1.

18105

9.83

18.43

17.98

10.31

2.

64205

3.42

5.16

5.20

3.30

3.

15311

3.39

4.50

4.55

3.67

4.

36101

6.53

3.88

4.36

7.22

5.

52605

3.09

4.00

4.02

3.06

6.

16002

1.25

3.04

2.90

0.47

7.

52603

1.15

2.83

2.76

1.24

8.

50404

1.38

2.57

2.51

1.35

9.

52602

2.30

2.15

2.22

2.03

10.

50200

1.61

2.22

2.21

1.44

11.

15312

3.44

2.06

2.20

3.98

12.

28111

2.87

1.75

1.93

3.21

13.

93010

1.11

1.84

1.76

0.35

14.

93011

0.99

1.45

1.46

1.01

15.

18101

3.60

1.06

1.40

4.12

16.

28920

1.40

1.37

1.40

1.43

17.

52609

1.57

1.23

1.30

1.24

18.

24248

0.28

1.20

1.15

0.30

19.

22219

1.25

1.04

1.08

1.26

20.

15319

1.66

1.05

1.03

2.03

Total

52.11

62.85

63.43

53.02

REASONS FOR SICKNESS/ INCIPIENT SICKNESS

7.9

It is essential to know the reasons for sickness/ incipient sickness for better policy formulation. Units satisfying one or more of the above criteria were treated by the enumerators as not having run satisfactorily and reasons were elicited. About 66 % of the sick/ incipient sick units were facing lack of demand, followed by 46 % facing shortage of working capital and 36 % facing marketing problems. The following table indicates the reasons given by the units suffering from sickness/ incipient sickness.

TABLE 48

S.No.

Reason for sickness/ incipient sickness

Proportion of sick/ incipient sick units*

Total SSI Sector

Regd. SSI sector

Unregd. SSI sector

1.

Lack of demand

66 %

58 %

69 %

2.

Shortage of working capital

46 %

57 %

43 %

3.

Non-availability of raw material

12 %

12 %

12 %

4.

Power shortage

13 %

17 %

12 %

5.

Labour problems

5 %

6 %

4 %

6.

Marketing problems

36 %

37 %

36 %

7.

Equipment problems

11 %

9 %

12 %

8.

Management problems

4 %

5 %

3 %

* The total in each column will exceed 100 %, as some units have reported more than one reason.

COMPOSITION IN TO REGD. AND UNREGD. SSI SECTORS

7.10

Information on no. of units having outstanding loan as on 31-3-2002 and the sources (institutional/ non-institutional) was colleted in the Third Census. This information indirectly indicates the situation of access to credit for the SSI sector. It was found that about 7.39 % of the units in the total SSI sector were having outstanding loan as on 31-3-2002. In case of regd. SSI sector, this percentage was very high at 20.1 %, whereas in the unregd. SSI sector it was 5.48 %. In case of institutional loans, about 4.55 % of the total SSI sector had outstanding loan as on 31-3-2002, whereas this percentage in regd. and unregd. SSI sectors was 14.26 and 3.09 respectively.

7.11

The composition of the total SSI sectors into regd. and unregd. SSI sectors in terms of these characteristics and the number of sick/ incipient sick units is given in the following table.

TABLE 49

S.No.

Characteristics

Total SSI Sector

Registered SSI Sector

Unregd.Sector

1.

No. of units having outstanding loan as on 31-3-2002

7,77,639
(100 %)

2,76,333
(35.5 %)

2,82,267
(59 %)

2.

No. of units having outstanding loan with institutional sources as on 31-3-2002

4,78,404
(100 %)

1,96,137
(41 %)

58,338
(56 %)

3.

No. of sick units (with erosion of net-worth by more than 50 % or delay in repayment of institutional loan by more than 12 months)

1,04,769
(100 %)

46,431
(44 %)

5,92,899
(79 %)

4.

No. of incipient sick units (decline in gross output over three consecutive years)

7,50,922
(100 %)

1,58,023
(21 %)

46,887
(55 %)

5.

No. of sick units as per RBI criteria, i.e., those that are sick among units having outstanding loan with institutional sources

85,290
(100 %)

38,403
(45 %)

6,30,568
(77 %)

6.

No. of sick/ incipient sick units (with erosion of net-worth by more than 50 % or delay in repayment of institutional loan by more than 12 months or decline in gross output over three consecutive years)

8,22,896
(100 %)

1,92,328
(23 %)

5,01,306
(64.5 %)