Rehabilitation Measures to Remove

Transcription

1 Chapter 7 Rehabilitation Measures to Remove Industrial Sickness In Chapter 6, we have presented a detailed analysis of the study carried out in Kamrup district over the period We have identified the factors behind the industrial sickness observed. The study covered nearly ten different types of units and focussed on the primary causes that contributed towards sickness. Here, we discuss some measures that have been taken by government both central and state and Reserve Bank of India as remedial steps which have been the basis of formulating appropriate policies at different levels. The suggestions have accumulated over the period of study and are related to the government, banks, financial institutions and the entrepreneurs. 7.1 Introduction The industrial sickness observed in the units spread all over Kamrup district have certain common elements and linkages primarily to lack of adequate infrastructure facilities, skilled manpower and inputs like raw materials, power, fuel etc. These issues are closely linked to the economic well being of the state. Therefore, it is strongly believed that appropriate measures can arrest the decline and rejuvenate the industrial climate of Kamrup district in particular and the state in general. 125

2 Here, we discuss certain rehabilitation measures which have been considered to be relevant in case of government and Reserve Bank of India policies for the purpose. Scarcity of capital is one of the important causes of slow rate of industrialization in the state. Proper and productive utilization of capital is of utmost importance in order to raise the rate of industrial as well as economic development of the state. Though the state possesses vast natural resources, adequate exploitation and utilization of resources have slowed down the rate of industrialization. Moreover, a large amount of capital has gone waste due to the growing issues of industrial sickness, particularly in the small scale industries. Thus, strong effort is needed as early as possible to deal with the problem of industrial sickness. Otherwise, this malady will spread to the whole industrial sector of the economy and thus vitiate the future industrial prospects of the state. The ever-increasing incidence of industrial sickness poses as a threat to the whole socio-economic setup of the state in particular and the country in general. 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. The discussion is subdivided into the following sections. In Section 7.2, the measures adopted by Government of India have been discussed. Some of the measures initiated by the Reserve Bank of India are included in Section 7.3. Section 7.4 includes the rehabilitation measures concerning the Govt. of Assam. An insight into the current state of industrial rehabilitation measures have been provided in Section 7.5. Section 7.6 concludes the chapter. 7.2 Rehabilitation Measures Adopted by Government of India The growing incidence of industrial sickness and the huge resources blocked in these sick units have necessitated the government to take certain steps in order to overcome the problem of widespread sickness in industries in India. Hence, some institutions 126

3 and committees were constituted and policies were adopted to deal with the problem of industrial sickness. These committees studied several aspects pertaining to sickness and suggested certain action plans for retrieving of industrial sickness. Similarly, the different institutions have their own package programmes to cure sickness. Term lending institutions in our country play an important role in rehabilitation of sick industrial units. Besides participating in modernization of plants of sick units, these institutions have their own revival measures. The role played by different term lending institutions are discussed below: 1. Industrial Reconstruction Corporation of India (IRCI)- The IRCI was established in April, It was constituted as a specialized financial institution to provide financial assistance for the reconstruction and rehabilitation of sick industrial units. The IRCI provided credit facilities to different state level institutions/union territories agencies like State Financial Corporations and State Industrial Development Corporations. Its main aim was to help rehabilitation of sick small scale industrial units. The activities of IRCI were confined to the eastern region of the country in its initial period, but the activities extended to other states of the country since June, Till the end of March, 1984, the IRCI sanctioned credit facilities to 17 state level/union territories agencies for a total amount of Rs. 8.5 crores and disbursed Rs. 1.5 crores [1]. On August 7, 1984, the IRCI was converted into a statutory corporation known as Industrial Reconstruction Bank of India (IRBI) by passing a bill in Parliament. In 1995, the Finance Ministry again renamed IRBI as Industrial Investment Bank of India (IIBI). Since the financial assistance provided by the institution was meagre, the government has currently closed the institution. 2. Industrial Finance Corporation of India (IFCI)- The IFCI was established in 1948 for providing medium and long term finance to industries. The role of IFCI mainly covers both the project financing operations and promotional activities. The Corporation has a Department, i.e. Problem Cases Department (PCD). Through its Department the Corporation processes and monitors the 127

4 cases of sick industrial units. After that it adopts proper remedial measures in order to revive the sick units. The PCD extensively reviews if a sick case is transferred to it and accordingly takes decisions to undertake a rehabilitation scheme. Moreover, the PCD monitors systematically the implementation of the rehabilitation scheme adopted for a sick unit and tries to merge a sick unit with a healthy one with essential resources both managerial and financial. IFCI has been taking initiative to provide concessional assistance for modernization of the Soft Loan Scheme to jute and sugar industries. This is a leading institution for jute and sugar industries since The loan sanctioned by IFCI increased from Rs. 210 crores in to Rs.1860 crores in [2]. But the number of defaulters of the IFCI has increased considerably primarily because of the reason that it was forced to lend to the wrong parties. 3. State Financial Corporations (SFCs)- The SFCs were set up in 1951 to provide financial assistance to small scale and medium-sized industries by passing an Act in 1951 and made it applicable to all the states. The SFCs provide liberal financial assistance on concessional terms to industrial units in specified backward areas. The loans and advances granted to industrial concerns are repayable within a period not exceeding 20 years. In India, every state has a Financial Corporation of its own. It may be mentioned that over 70 % of the total assistance sanctioned and disbursed by all SFCs is provided to small scale industries [3]. Besides SFCs, there are 28 State Industrial Development Corporations (SIDCs). Their main objectives are to promote industrial development of the respective states and to augment the rate of development of backward regions. 4. Industrial Credit and Investment Corporation of India (ICICI)- The ICICI was sponsored by a mission from the World Bank. The main objective was to develop small and medium industries in the private sector. The Corporation granted long term and medium term loans, both rupee loans and foreign currency loans. The important aim of the Corporation was to assist the expansion 128

5 and modernization of existing industries and to furnish managerial, technical and administrative advice to industries. To deal with the ever-growing problem of industrial sickness, the ICICI participated with the IDBI, IFCI and other financial institutions in providing assistance on soft terms to projects of modernization on cotton textiles, jute, sugar, cement and engineering industries. The Corporation commenced sanction under the Soft Loan Scheme in 1977 and by the end of the year had sanctioned Rs crores to 41 companies [4]. It can be noted that several projects assisted by ICICI failed to meet the expectations, though in some cases its success rate was remarkable. In 1983, ICICI commenced leasing operation in industries like textiles, engineering, chemicals, fertilizers, cement, sugar etc. The loans disbursed by the Corporation rose from Rs.180 crores in to Rs crores in [5]. ICICI was the most successful development financial institution set up by the Government of India. 5. Industrial Development Bank of India (IDBI)- The IDBI was set up in July, The objective was to bring into existence an apex institution to coordinate the activities of all agencies which are concerned with the provision of finance for industrial development like other financial institutions and banks. Another objective was to provide direct financial assistance to industrial units particularly large and medium-sized units. The IDBI was wholly-owned subsidiary of the Reserve Bank of India. However, it was delinked from the Reserve Bank of India in 1976 and was taken over by the Finance Ministry. A Rehabilitation Finance Division (RFD) was set up in IDBI in February 1976 to deal with the problems of sick industrial units. The measures adopted for rehabilitating sick industrial units include identification of causes of sickness, assessment of rehabilitation needs, formulation of appropriate measures in consultation with participating institutions and banks, close monitoring of sick units and periodical evaluation of the impact of rehabilitation measures 129

6 [6]. Rehabilitation assistance was given to 202 sick units by the IDBI by the end of June, 1984 of which cotton textile, sugar, paper, metal and engineering accounted for 65 % [7]. Moreover, the IDBI also granted soft loans to industrial units and it became as one of the most important institutions assisting industries till But the disbursement of loans by IDBI declined from Rs.17,480 crores to Rs.4820 crores between 2001 and 2005 [8]. 6. Small Industries Development Bank of India (SIDBI)- The Government of India set up Small Industries Development Bank of India (SIDBI) in April, 1990 as a wholly owned subsidiary of IDBI. SIDBI has been playing a vital role in the promotion, financing and development of small scale industries in India. SIDBI makes use of different banking and financial institutions exist in the country in the matter of extending financial assistance to the small scale units. The important functions of SIDBI are given below [9]: (a) SIDBI refinances loans and advances extended by the primary lending institutions to small scale industrial units and also provides resources support to them; (b) SIDBI discounts and rediscounts bills arising from sale of machinery to or manufactured by industrial units in the small scale sector; (c) SIDBI extends seeds capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi and Mahila Vikas Nidhi and seed capital schemes through specified lending agencies; (d) SIDBI grants direct assistance as well as refinance loans extended by primary lending institutions for financing expert of products manufactured by industrial concerns in the small scale sector; (e) SIDBI provides services like leasing, factoring etc. to industrial concerns in the small scale sector; 130

7 (f) SIDBI extends financial support to State Small Industries Development Corporations for providing scarce raw materials to and marketing the end-products of industrial units in the small scale sector, and (g) SIDBI provides financial support to National Small Industries Corporation for providing leasing, hire-purchase and marketing support to industrial units in the small scale sector. Several steps have been taken by SIDBI like technological upgradation and modernization of existing units, marketing of products in internal and international market etc. Moreover, operation of Single Window Scheme (SWS), provision of Automatic Refinance Scheme (ARS), setting up of venture capital scheme are some of the major steps taken by SIDBI for the development of small scale industries. SIDBI has succeeded to a great extent in extending financial assistance to small scale sector. During , it disbursed Rs.10,130 crores which can be considered to be a great success within a short period of time [10]. 7.3 Rehabilitation Measures Adopted by Reserve Bank of India The Reserve Bank of India has been playing a vital role in preventing sickness in industrial units. Since the amount of outstanding bank credit has gone up day by day, the Bank has been taking keen interest not only reviving the sick units, but also influencing the financial institutions to provide rehabilitation packages for these sick units. The first organized attempt to tackle the problem was made when the Reserve Bank of India organized a seminar on sick industrial units in April, 1976 [11]. After the seminar, the Bank created a Sick Industrial Cell in 1976 in its Department of Banking Operation and Development (DBOD). The important steps taken by the Cell were to monitor the performance of commercial banks in identifying the sick units and launch proper remedial measures whenever necessary. Another step was 131

8 to coordinate the efforts of the government, banks, financial institutions and other agencies in rehabilitation of potentially viable sick units. The Reserve Bank of India, in November, 1976, asked the commercial banks to furnish a quarterly statement of all sick units enjoying aggregate credit limit of Rs. 1 crore and above from the banking system. The banking system which has already developed an information system under the guideline of the Reserve Bank of India can help in detecting incipient sickness in industrial units. Again the Reserve Bank of India has asked each bank to create a Cell both at the central and regional offices in order to observe the position of sick industrial units on an ongoing basis so that the reasons of sickness can be found out. The Cell has to ascertain the viability of the units and if it is found viable, it has to determine the appropriate steps necessary for its rehabilitation. In order to understand the problems of a sick unit properly and to take decision for rehabilitation on time, the Reserve Bank of India takes initiative to bring the financial institutions together. The banks are asked by the Reserve Bank of India to furnish with quarterly reports on the basis of performance of both healthy and sick units. The Reserve Bank of India constituted a Study Group called Tandon Committee Report in July, 1974 to suggest guidelines to commercial banks for follow-up and supervision of credit for ensuring end-use of funds and keeping a watch on their safety, to recommend a system for obtaining periodical forecast and prescribing inventory norms for different industries and to suggest criteria in respect of satisfactory capital structure and sound financial basis [12]. In 1975, another committee, i.e. Varshnay Committee was appointed by the State Bank of India. The purpose was to identify the important causes of industrial sickness and their impact on bank loans. The Committee defined a sick industrial unit as a unit which fails to generate internal surplus on continuing basis and depends for its survival on frequent infusion of external funds [13]. According to the Committee, there are two main factors which determine the sickness of an industrial unit. 132

9 First, the unit fails to create surplus funds internally on permanent basis. Second, the unit has to depend on external funds for its survival due to lack of generation of internal surplus. The Committee in its study found that internal causes were mainly responsible for sickness in industrial units though in some cases internal weaknesses were affected by external factors also. In the opinion of the Committee, efficient and effective management are indispensable to control the internal weaknesses of the industrial units. Another committee named H. N. Ray Committee was appointed in 1976 [14]. A high power Committee was constituted in 1978 to discuss the problem of sickness and the role of the banking system in their rehabilitation [15]. Among the different decisions taken by the Committee, the most important decisions were as under: The Committee advised the banks to collect quarterly information of the identified sick units and after conducting viability study, the industrial units should be put under rehabilitation programme. The Standing Coordination Committee was appointed in January 1979 following the recommendations of the Inter-Institutional Group (Bhucher Committee). The main objective was to consider issues relating to coordination between banks and term lending institutions. In August, 1983, the Committee was reconstituted. The Chairman of the Committee was A. Ghosh, Deputy Governor of the Reserve Bank of India. The Committee would help in effective and speedy implementation of different schemes for revival of potentially viable sick units. The Reserve Bank of India issued detailed guidelines on March 26, 1981 on the constitution of State Level Inter-Institutional Committee (SLIIC) though it was initially set up at the Regional Offices of Reserve Bank of India. As per guidelines, the Secretary (Industries) of the concerned state government would be the Chairman of the Committee and Director. The Committee in- 133

10 cluded representatives of SISI, SFC, SIDC, IDBI and 3-4 banks with majority presence as members. The important function of the Committee was to monitor/review the different cases of rehabilitation of sick small scale industrial units. The two main objectives of the Committee were- (1) interaction regarding rehabilitation of sick small scale industrial units between state government officials and state level institutions and (2) interaction between term lending institutions and banks. A sub-committee of SLIIC was also set up. In this committee the borrowers and the concerned banks could make a discussion on the issues of rehabilitation. The Convener of the SLIIC is the Reserve Bank. The Committee meets once in a quarter. A Committee was constituted on July 14, 1981, headed by Shri T. Tiwari, Chairman, IRCI, Calcutta and members from Reserve Bank of India, various banks such as State Bank of India, Bank of Baroda, United Bank of India and other term lending institutions such as IDBI, IFCI, ICICI and so on [16]. The purpose was to examine the legal and other difficulties encountered by banks and financial institutions in the rehabilitation of sick industrial undertakings and to suggest remedial measures including changes in law. The Tiwari Committee submitted its report to the government in September, The Committee emphasized the need for a special legislation designed to deal with the problems of sickness in industrial units. The Committee further suggested to set up an exclusive quasi-judicial body in order to revive the sick industrial units. Based on the recommendations of the Tiwari Committee, the Government of India enacted the Sick Industrial Companies (Special Provision) Act (SICA) in 1985 [17]. The important objective of SICA was to detect sickness at early stages and to suggest remedial measures for revival of potentially viable sick industrial units. Thus SICA was considered to be a crucial step taken by the government to deal with the problems of sickness in industrial units in the country. A sick industrial company defined by SICA has already been explained in earlier chapters along with the extensive changes made in the Act from time to time. 134

11 In conformity to the provisions of SICA, the Board for Industrial and Financial Reconstruction (BIFR) was set up in January, The Board started functioning with effect from 15th May, 1987 and now all industrial companies are required to report themselves to BIFR whose peak net worth in immediately preceding five financial years has been eroded by 50 %. Of course, changes have been made in the definition of sick company and the Companies (Second Amendment) Act, 2002 has been cited earlier in the work. The Appellate Authority for Industrial and Financial Reconstruction (AAIFR) was also set up in 1987 in order to hear appeals against the orders of BIFR. The BIFR can appoint as operating agency to any public financial institutions and banks as specified in the Act. The main function of the operating agency is to make enquiry and formulate a scheme for revival/rehabilitation of sick companies. The Reserve Bank of India constituted a Committee under the Chairmanship of Shri A. Hasib, the then Executive Director of the Bank. The same guidelines issued for rehabilitation of large and medium scale units were applicable in case of the rehabilitation of sick small scale industrial units found potentially viable till February, The Reserve Bank of India felt the need for introducing separate guidelines for rehabilitation of sick units in small scale industrial sector. The Hasib Committee was constituted to examine the definition of sick small scale industrial unit, incipient sickness, viability norms and reliefs and concessions from banks and other financial institutions for implementation of rehabilitation package in case of potentially viable industrial units while issuing separate guidelines for rehabilitation of sick small scale industrial units. The Reserve Bank of India issued detailed guidelines for rehabilitation of sick small scale industrial units in 1987 basing on the recommendations of this Committee. These guidelines pertaining to the definition of sick units, nature of relief and concessions etc. underwent several changes in the later period because of the different High Level Committees constituted both by the government and the Reserve Bank of India like Nayak Committee, Goswami Committee, Kapur Committee, the Kohli Working Group etc. 135

12 In December, 1991, the Reserve Bank of India constituted another Committee under the Chairmanship of P. R. Nayak. The Nayak Committee submitted its report in September, The Committee discussed in details the existing Reserve Bank of India guidelines on sick small scale industrial units and suggested certain changes. The major measures recommended were to modify the definition of sick small scale industrial unit, ensure setting up of separate cell to deal with sick small scale industrial units by banks at the regional centres, bear the sacrifices for rehabilitation of sick units by all the concerned agencies, not only commercial banks and/or SFCs alone, revitalise SLICs and act SIDBI as the convener of the SLIIC, set up special courts to deal with recovery suits of banks etc. Another Committee was set up by the government under the Chairmanship of Prof. Omkar Goswami. The Committee looked into the several aspects of industrial sickness and issues relating to corporate restructuring. The Committee submitted its report in July, The major recommendations of the Committee were as follows [18]: 1. The BIFR should be a fast tract facilitator by taking decisions instead of seeking clarifications and explanations. 2. There should be 5 self-financing recovery tribunals exclusively for recovering corporate debts to secured creditors. 3. The Reserve Bank of India guidelines for rehabilitation should need to be altered to abjure the notion of sacrifices and instead address the basic issues in appraisal. 4. The Central Board of Direct Taxes (CBDT) should remove all tax hurdles that prevent banks and financial institutions from converting debt to equity of sick companies particularly when recommended by BIFR. 5. The definition of sickness needs to be modified to facilitate early detection etc. In December 1997, the Reserve Bank of India appointed a Committee, named Kapur Committee on the working of credit delivery system for small scale industries. 136

13 The Committee submitted its report on June, The report stressed the need of restructuring and reorientation of the different financial institutions like SIDBI, SFC and commercial banks. In order to enlarge the flow of financial assistance to the small scale industries, the Committee opined for setting up of some new funds and agencies. In the matter of SIDBI, the Committee recommended that it should be given the role of a strong apex body in order to coordinate the credit delivery system of the small scale industries. The Committee further suggested to restructure the weaker SFCs. Commercial banks should play a crucial role regarding opening of the existing branches. Moreover, the Committee gave stress on converting the existing branches to special branches to finance the small scale industries. The Reserve Bank of India has been issuing several guidelines for rehabilitation of sick small scale industrial units from time to time. The Chief General Manager of Reserve Bank of India wrote letters to all scheduled commercial banks in January, The main contents of the letters are as follows: Several internal and external factors have put considerable pressure on the performance of the SSIs, resulting in a number of them becoming sick. Of late, the incidence of sickness in SSI sector is showing an increasing trend and a large number of SSI units, identified as sick, were not found potentially viable. To address this, and other allied issues, the Group of Ministers on SSI, in their meeting held on 16th August, 2000, had desired that Reserve Bank of India should draw up a revised, detailed, transparent and non-discretionary guidelines for rehabilitation of current sick and potentially viable SSI units. Accordingly, a Working Group on Rehabilitation of Sick SSI was constituted by Reserve Bank of India in November 2000 with the Chairman, Indian Banks Association, Shri S. S. Kohli, as its Chairman. The Group has since submitted its report and all the major recommendations made therein, including a change in the criteria for identification and classification of sick units in the SSI sector, have been accepted by the Reserve Bank of India. The draft revised guidelines were put on Reserve Bank of India website and also circulated among banks, SSI Association, etc. for eliciting their views. 137

14 The suggestions have been considered while finalizing the revised guidelines drawn up on the basis of the recommendations of the Working Group [19]. The revised guidelines issued for rehabilitation of sick units in the SSI sector are available in [20]. 7.4 Rehabilitation Measures Adopted by Government of Assam In order to rehabilitate the sick small scale industries in the State of Assam, it is indispensable to evolve a well planned and scientific strategy. The strategy must stress on proper, scientific and in-depth study of the different sick small scale industries and identify the viable sick units where rehabilitation measures can be taken. Money or resources should not be wasted putting on non-viable units in a capital scarce economy like Assam. The first move in Assam to adopt measures for rehabilitation of sick units was the constitution of a State Level Coordination Committee on SSI Sick units [21]. In this Committee, the Managing Director of ASIDC was the Convenor and the Director of Industry was the Chairman. The Committee consisted of representatives from entrepreneurs and organizations such Assam Productivity Council. But this was a non-official body. It was the responsibility of the District Industries Center to identify the sick units through extensive examination of the records of the banks. But several problems were faced by the DIC as most of the banks failed to submit proper records. The State Bank of India and United Bank of India, however, extended full support in submitting proper records. On the basis of the recommendations of the said Committee, five units were selected for rehabilitation. Accordingly for these five units appropriate measures were taken under Assam State Industrial Rehabilitation (Special) Act It may be mentioned that this Act was based on an Ordinance promulgated by the Governor in The provision of 1984 Act enabled the declared units to have 5 years moratorium on 138

15 market dues, moratorium on bank dues for 7 years with frozen interest and deferred payment of statutory dues [22]. Out of the five units selected for rehabilitation, three of them have been found as healthy. The case of one unit has been under processing and the rest one has been reported as doubtful case. After that a State Level Inter-Institutional Committee (SLIIC) was constituted to monitor/review the cases of rehabilitation of sick small scale industries. The operation of the non-official body, i.e. State Level Coordination Committee came to a halt. In the SLIIC, the Chairman and Convenor are the Commissioner of Industries and the representative of the regional office of the Reserve Bank of India respectively. In the matter of adopting rehabilitation measures by the government, certain procedures are followed. The District Industries Centers in their respective districts scrutinies cases submitted by the industrial units. After proper verification, these cases are forwarded to the SLIIC. There is a Standing Committee in SLIIC consisting of the Director of Industries and representative both from the ASIDC and the concerned banks. The recommendations given by the DICs are further scrutinized by the Standing Committee and forwarded to the SLIIC. The SLIIC then sends the cases approved by the Standing Committee to the government for taking up rehabilitation measures under the Act of The adoption of the rehabilitation measures to the industrial units depends on the government acceptance of the recommendations given by the SLIIC. The Industrial Policy of Assam, 1986 stressed on the rehabilitation of viable sick industrial units in the state. Another Industrial Policy was announced in 1991 by the Government of Assam. Among various objectives, one of the important objectives of this Policy was to provide for the revival of viable sick units through proper identification and provision of comprehensive package of assistance and to take steps for periodical and regular monitoring and guidance to new units to avoid sickness. This industrial Policy considered the necessity to review and revise the existing industrial policy and incentive scheme which became operative from 1st January, 1987 [23]. 139

16 All incentives under the 1991 Incentive Scheme would be available for revival of viable sick industrial units. The incentives were as follows: 1. Sales Tax Exemption 2. Subsidy on Infrastructural Facilities 3. Allotment of Factory Sheds to SSI Units 4. Manpower Development of Local Entrepreneurs 5. Equity Participation in the Assisted Sector 6. Interest Subsidy 7. Reduction of Assam Finance Tax 8. Power Subsidy 9. Contribution to Feasibility Study Cost 10. Subsidy on Generating Sets 11. Development Subsidy 12. Connectivity of Power Line 13. State Capital Investment Subsidy 14. Pioneer Unit. The Industrial Policy of Assam, 1991 failed to raise the rate of industrial development of the state. Further, the state failed miserably to reap the benefit of economic liberalization and globalization process adopted throughout the country. Hence, the state government introduced a new Industrial Policy in March, This Industrial Policy formulated a package of incentives for the promotion of industrial units and revitalization of sick industrial units in the state. The 1997 Incentive Scheme became operative from 1st April, 1997 for five years. The various incentives made available under the 1997 Incentive Scheme were- 140

17 1. Power Subsidy 2. Interest Subsidy 3. Capital Investment Subsidy 4. Subsidy on Generating Set 5. Exemption of Sales Tax 6. Equity Contribution to Viable Projects and 7. Other Subsidies like (a) subsidy on cost of pollution control equipment, (b) subsidy for ASEB connection and installation of transformer and (c) subsidy on cost of quality control equipment. All the incentives cited above would also be available for sick units. In 1997, the state government declared six public sector units as sick and initiated efforts for revival of these sick PSUs by handing them over to joint sector [24]. The Government of Assam declared another Industrial Policy affective from April, The Industrial Policy of Assam, 2003 has been formulated in the light of the experience of implementation of the Industrial Policy of 1982, 1986, 1991 and 1997 [25]. Among the various aims and objectives, one of the objectives was to take steps to revive the potentially viable sick Public Sector Undertakings and to make the Public Sector Undertakings economically viable. It has been proposed in the Policy to give certain incentives like 1. State Capital Investment Subsidy (30 % on Plant and Machinery) 2. Interest Subsidy on Working Capital Loan (30 % on paid up interest) 3. Power Subsidy for 5 years 4. Subsidy on Captive Power Generation 5. Subsidy on Marketing Assistance 141

18 6. Subsidy on Drawl of Power Line 7. Special Incentives for Food Processing/Electric/Agro-based/Biotech industries 8. Special Incentive to Women/Physically Challenged Entrepreneurs 9. Export Development Fund for development of Export Oriented Projects 10. Financial Assistance from Ministry of Food Processing Industries at the rate 33 per cent on Plant and Machinery and Technical Civil Works (ceiling Rs crore) and 11. Special Incentives under Assistance to State Infrastructure Development for Export Allied Activities (ASIDE) [26]. In order to accelerate the rate of industrialization in the state, the Government of India announced the North East Industrial Investment Promotion Policy (NEIIPP) in In this Policy, special stress has been given on the word INVESTMENT. The Government of India approved a package of fiscal incentives and other concessions for the entire North Eastern Region (NER). Assam has the advantage to reap more benefit from this Policy. Some of the important features incorporated in the policy are- [27] All new units as well as existing units (which go for substantial expansion) and commence commercial production within the 10 years period (with effect from to ) set up anywhere in the NER will be eligible for incentives for a period of 10 years. 100 % Excise Duty exemption will be continued on finished products made in the NER. 100 % Income Tax exemption will continue as was available under NEIP Capital Investment Subsidy at the rate of 30 % will be available on investment of Plant and Machinery and limit for automatic approval at the rate will be Rs. 1.5 crore etc. 142

19 Interest Subsidy will be available at the rate of 3 % on working capital loan. The Government of Assam has realized that economic development of the state can be raised by augmenting the rate of industrialization. Hence, the Government of Assam has declared another Industrial Policy in The main aims of the Policy have been to provide more support to the local entrepreneurs and to attract more investment from other parts of the country. The Policy has also emphasized the revival of sick industries in the state. Further, special importance has been given to the development and expansion of the micro and small sector. The highlights of the policy are [28]- Interest Subsidy on term loan provided to Micro industrial units at the rate of 30 per cent of the amount of interest paid to Bank/Financial Institutions for a period of 5 years from the date of commercial production subject to a ceiling of Rs lakh per unit/year. Power Subsidy-30 per cent subsidy on power tariff on actual unit consumed for 5 years up to connected load of 1.00 MW subject to ceiling of Rs lakh per annum and 25 per cent for connected load above 1.00 MW subject to Rs lakh from the date of commercial production. Special incentive for mega projects with large investment with a minimum of Rs. 100 crore or generating a minimum of 1000 regular employment and having potential for development of ancillary industries will receive all incentives including priority on land allotment, tax concessions etc. on case to case basis. Special incentive like exemption of VAT and Central Sales Tax for a period of 3 years for revival of sick industries. To encourage Micro and Small Scale Sector and to facilitate market linkage, government will actively encourage trade with neighbouring countries and countries in South-East Asia. 143

20 25 % subsidy on Drawl of Power Line to the premises of the unit including the cost of transformer to Micro and Small Industrial Units. Special incentive to Food Processing/ Electric/ Agro-based/ Biotech industries. Special incentive to Women/ Physically Challenged Entrepreneurs. VAT exemption to all eligible units which manufacture goods in Assam under the Assam Value Added Tax Act, 2003 and the Central Sales Tax Act, Exemption of Stamp Duty and Registration Fee for setting up of Industrial Park/ Estate. 7.5 An Insight into the Current State of Industrial Rehabilitation Measures The various industrial policies discussed above have failed to raise the rate of industrialization in the state. Except a few new objectives, all previous ones of the different industrial policies have been the same. The state government has failed to keep its commitments in providing properly the incentives and subsidies incorporated in the different industrial policies. Hence, the entrepreneurs in the state have gathered a bitter experience in setting up of industrial units. Due to widespread red-tapism, nepotism etc. the investments and schemes of the entrepreneurs could not proceed satisfactorily. The flow of incentives and subsidies were not adequate at the time of requirements of the entrepreneurs. Further, inadequate supply of power created a severe problem to the industrial units. Under such circumstances, the production of different industrial units had declined and some of the entrepreneurs had to close down their business. As a result, some of the recently set up small scale units have been plagued by sickness and thus corroded the narrow industrial base in the state. The problem of shortage of capital in the state can be removed when the state government attracts more private capital, both domestic and foreign. Proper 144

21 training should be imparted to the officials and staffs of the different agencies concerned with industries in the state. The success of the several policies adopted by the government for industrial development of the state depends to a great extent in taking initiative measures to build confidence among the investors. If this can be done, it will pave the way for large investment in the industrial sector and help in tapping the huge industrial potential of the state. Such steps will also exert positive impact in arresting industrial sickness, particularly in small scale sector. In this context, certain discussion on institutional finance is important. Institutional finance plays a very vital role in the development of industries in various states of the country. We have already discussed the financial assistance extended to industries by different term lending institutions of the country. But in case of Assam, the flow of institutional finance is very low as compared to the other states of the country. The financial assistance sanctioned and disbursed by commercial banks and other institutions like Industrial Credit and Investment Corporation of India (ICICI), Industrial Finance Corporation of India (IFCI), Assam Industrial Development Corporation (AIDC), North Eastern Development Finance Corporation Ltd. (NEDFi), Assam Financial Corporation (AFC), Industrial Development Bank of India (IDBI), Industrial Investment Bank of India (IIBI), National Small Industries Corporation (NSIC), Small Industries Development Bank of India (SIDBI) etc. has not been sufficient. Since inadequate institutional finance is one of the major factors of sickness in industries, the state government should give proper stress to make these financial institutions and banks more functional and active. Such steps will help in combating industrial sickness, particularly in small scale industries in the state. The sad part of the story is that as per the information provided by North Eastern Small Scale Industries Association (NESSIA), not a single sick unit has been rehabilitated in the state so far [29]. 145

22 7.6 Conclusion Here, a detailed account of revelent rehabilitation measures have been outlined which are expected to be helpful in preventing sickness and rejuvenate industrial health. First, we have discussed the different rehabilitation measures initiated by Govt of India. Next, we have discussed certain measures taken by the Reserve bank of India for rehabilitation of sick industrial units of the country. Govt of Assam has also given priority to rehabilitation. Such measures are also discussed. At the end, an insight into the entire scenario of rehabilitation of sick industrial units as observed in Assam has been included. In Chapter 8, we subsequently discuss some of the suggestions relevant towards reducing industrial sickness. 146

23 References [1] Srivastava, S. S. and Yadav, R. A., (1986), Management and Monitoring of Industrial Sickness, Concept Publishing Company, New Delhi, pp [2] Datt, G. and Mahajan, A., (2013), Datt and Sundharam Indian Economy, S. Chand and Company Pvt Ltd, New Delhi, p [3] Ibid, p [4] Kaveri, V. S., (1983), How to Diagnose, Prevent and Cure Industrial Sickness (A Practical Approach), Sultan Chand and Sons, New Delhi, p [5] Srivastava, S. S. and Yadav, R. A., (1986), Management and Monitoring of Industrial Sickness, Concept Publishing Company, New Delhi, p [6] Ibid, p [7] Ibid, p [8] Datt, G. and Mahajan, A., (2013), Datt and Sundharam Indian Economy, S. Chand and Company Pvt Ltd, p [9] Ibid. p [10] Ibid. p [11] Kaveri, V. S., (1983), How to Diagnose, Prevent and Cure Industrial Sickness (A Practical Approach), Sultan Chand and Sons, New Delhi, p [12] Khan, Nafees A, (1990), Sickness in Industrial Units, Anmol Publications, New Delhi, p

24 [13] Sickness in Small Industry, (1988), Reddy, T. S. and Reddy, L. V., (ed.s), Himalaya Publishing House, Bombay, p. 5. [14] Prasain, G. P., Singh, E. N., (2012), Industrial sickness in Manipur-Causes and Remedies, Concept Publishing Company Pvt, Ltd., New Delhi, p. 10. [15] Khan, Nafees A, (1990), Sickness in Industrial Units, Anmol Publications, New Delhi, p. 76. [16] Bidani, S. N. And Mitra, P. K., (1988), Industrial Sickness-Identification and Rehabilitation, Vision Books Pvt. Ltd., New Delhi, p [17] Government of India, Ministry of Law and Justice, The Sick Industrial Companies (Special Provisions), Act, 1985, [18] Jalan, P.K., (2004), Industrial Sector Reforms in Globalization Era, Sarup and Sons, New Delhi, p. 70. [19] RBI/ /273 RPCD.CO.MSME & NFS. BC. 40/ / [20] Ibid. [21] Barua, P. C., (1992), Planning and Develoment of Assam, Mittal Publications, New Delhi, p. 59. [22] Ibid, p. 59. [23] Daimari, P., (2008), Five Year Plans and Industrialisation in Assam, EBH Publishers (India), Guwahati, Assam, p [24] Ibid, p [25] Economic Survey, Assam, , (2008), Directorate of Economics and Statistics, Assam, Guwahati, p. 79. [26] Economic Survey, Assam, , (2009), Directorate of Economics and Statistics Assam, Guwahati, p

25 [27] Ibid, p. 77. [28] Economic Survey, Assam, , (2010), Directorate of Economics and Statistics Assam, Guwahati, p [29] The Sentinel, Guwahati, 27 Oct.,