Industrial SicknessIndustrial Sickness

What does Sickness imply???What does Sickness imply???

Empty TreasuryEmpty Treasury

Inability to repay debt installments from loans and statutory Inability to repay debt installments from loans and statutory liabilities like Provident Fund etc. liabilities like Provident Fund etc.

Mounting Losses, High Rejection Rate of Goods, Piling Mounting Losses, High Rejection Rate of Goods, Piling InventoryInventory

Inability to do Business competitively, Industrial Disputes, Low Inability to do Business competitively, Industrial Disputes, Low Capacity Utilization.Capacity Utilization.

Worse than Worse than BankruptcyBankruptcy (which implies a debt default), as it (which implies a debt default), as it implies an erosion of the net worth of the companyimplies an erosion of the net worth of the company

ie. The company is ie. The company is InsolventInsolvent or Financially Ruined for all practical or Financially Ruined for all practical purposes. purposes.

What are the reasons of What are the reasons of becoming sick ?becoming sick ?

Losses are due to drainage of resources on wasteful or Losses are due to drainage of resources on wasteful or unnecessary expenditure. Sickness is caused by unnecessary expenditure. Sickness is caused by prolonged periods of losses sustained by the company.prolonged periods of losses sustained by the company.

There are two main categories:There are two main categories:

1. Internal Reasons1. Internal Reasons

2. External Reasons2. External Reasons

Internal reasonsInternal reasons(which can be controlled by company)(which can be controlled by company)

MismanagementMismanagementUnderestimation of the cost of the project Underestimation of the cost of the project Delay in the implementation of the projectDelay in the implementation of the projectIncrease in cost due to delay in implementation of projectIncrease in cost due to delay in implementation of projectUnder Utilisation of ResourcesUnder Utilisation of ResourcesDiversion of FundsDiversion of FundsLack of Management depthLack of Management depthBad Industrial RelationsBad Industrial RelationsBureaucratic managementBureaucratic managementInadequate working capitalInadequate working capitalHeavy Expenditure in AdvertisementsHeavy Expenditure in Advertisements

External reasonsExternal reasons(which cannot be controlled by the (which cannot be controlled by the

company)company)

Adverse government rules and regulationsAdverse government rules and regulations

Adverse Price Control PolicyAdverse Price Control Policy

Recession Trend/economic conditionsRecession Trend/economic conditions

Tough CompetitionTough Competition

Shortage of Manpower, Raw Materials etc.Shortage of Manpower, Raw Materials etc.

Changes in TechnologyChanges in Technology

Changes in Consumer BehaviourChanges in Consumer Behaviour

Shortage of Power SupplyShortage of Power Supply

Delay in getting any financial assistance.Delay in getting any financial assistance.

Industrial SicknessIndustrial Sickness

A A Sick Industrial CompanySick Industrial Company implies the following: implies the following:

1. It must be an industrial company which is as specified in the First 1. It must be an industrial company which is as specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 Schedule to the Industries (Development and Regulation) Act, 1951 (IDRA) but does not include an ancillary industrial undertaking or a (IDRA) but does not include an ancillary industrial undertaking or a small scale industrial undertaking as defined under IDRA.small scale industrial undertaking as defined under IDRA.

2. The company should have been in an existence for at least 5 years 2. The company should have been in an existence for at least 5 years since the date of incorporation.since the date of incorporation.

3. The company should have accumulated losses equal to or 3. The company should have accumulated losses equal to or exceeding its net worth at the end of any financial year. exceeding its net worth at the end of any financial year.

'Net Worth' means the sum total of paid-up capital and free reserves'Net Worth' means the sum total of paid-up capital and free reserves

Types of Sick UnitsTypes of Sick Units

Industrial units

Born SickAchieved Sickness Sickness Thrust

1. Born sick1. Born sick

These units were not financially viable from the outstart These units were not financially viable from the outstart and were undertaken due to lack of foresight and and were undertaken due to lack of foresight and business acumen. business acumen.

Characterized by:Characterized by:

1.1. Lack of experience of the promoters, wrong selection of Lack of experience of the promoters, wrong selection of the project.the project.

2.2. Faulty project planning Faulty project planning

3.3. Paucity of funds and faulty finanacial managementPaucity of funds and faulty finanacial management

4.4. Time and cost over-runs.Time and cost over-runs.

5.5. Location related problems.Location related problems.

(Continued….)(Continued….)

6.6. Technological factorsTechnological factors

7. Wrong assessment of the market potential 7. Wrong assessment of the market potential

8. Faulty demand forecasting 8. Faulty demand forecasting

9. Change in the market conditions including the change in 9. Change in the market conditions including the change in the customer tastes and preferences the customer tastes and preferences

10. Competitive situation, etc.10. Competitive situation, etc.

2. Achieved Sickness2. Achieved Sickness

These units had a viable business cycle and became These units had a viable business cycle and became sick due to mismanagement or external reasons.sick due to mismanagement or external reasons.

Characterized by:Characterized by:1.1. Bad managementBad management2.2. Unwarranted expansion and diversion of resourcesUnwarranted expansion and diversion of resources3.3. Inability to modernize resulting in low efficiencyInability to modernize resulting in low efficiency4.4. Too much competition by larger players, especially from Too much competition by larger players, especially from

overseasoverseas5.5. Product becomes obsoleteProduct becomes obsolete6.6. Changes in Government rules and regulationsChanges in Government rules and regulations

3. Sickness Thrust3. Sickness Thrust

These units are not yet classified as sick but are These units are not yet classified as sick but are rapidly losing profits and market share to competitorsrapidly losing profits and market share to competitors

Characterized by:Characterized by:1.1. Increased CompetitionIncreased Competition2.2. Move towards SicknessMove towards Sickness3.3. Inability to modernize resulting in low efficiencyInability to modernize resulting in low efficiency4.4. Other factors are similar to Achieved SicknessOther factors are similar to Achieved Sickness5.5. There is a scope to control the factors before There is a scope to control the factors before

achieving sicknessachieving sickness6.6. These units are weak or These units are weak or potentially sickpotentially sick

Weak or Potentially Sick Weak or Potentially Sick CompaniesCompanies

A A Potentially Sick Industrial CompanyPotentially Sick Industrial Company implies the implies the following:following:

1. The company should be in an existence for atleast 4 1. The company should be in an existence for atleast 4 years since the date of incorporation.years since the date of incorporation.

2. The company should have an accumulated losses equal 2. The company should have an accumulated losses equal to or exceeding to or exceeding 50% 50% of its of its net worth net worth during the during the immediately preceeding 4 years. immediately preceeding 4 years.

'Net Worth' means the sum total of paid-up capital and 'Net Worth' means the sum total of paid-up capital and free reserves. free reserves. These companies are at the stage of 50 percent erosion These companies are at the stage of 50 percent erosion of their Net Worthof their Net Worth

Consequences of SicknessConsequences of Sickness

The Sickness of a company has an immediate impact on all The Sickness of a company has an immediate impact on all the entities related to it. the entities related to it.

Chiefly:Chiefly:1.1. The The LabourLabour or Workforce of the Company faces or Workforce of the Company faces

unemploymentunemployment2.2. The The CreditorsCreditors of the Company (to which it owes money) face of the Company (to which it owes money) face

bad loans and lossesbad loans and losses

3.3. Loss of productionLoss of production4.4. Loss of revenue to the exchequerLoss of revenue to the exchequer

Sick companies must either face Sick companies must either face Restructuring Restructuring or or ClosureClosure

Corporate RestructuringCorporate Restructuring

Restructuring is an attempt to revive a sick unit by Restructuring is an attempt to revive a sick unit by reversing negative trends through reversing negative trends through Turnaround Turnaround ManagementManagement..

It Involves:It Involves:Financial ReconstructionFinancial ReconstructionChange in ManagementChange in ManagementAmalgamation into a larger entityAmalgamation into a larger entitySale or lease of a part or whole of any industrial Sale or lease of a part or whole of any industrial undertaking of such companyundertaking of such companyRationalization and streamlining of personnel Rationalization and streamlining of personnel

Restructuring often generates bureaucratic tangles and Restructuring often generates bureaucratic tangles and losses of money and time. losses of money and time.

ClosureClosure

The The ClosureClosure of a company involves: of a company involves:

1.1. Sale of assets to pay off creditorsSale of assets to pay off creditors

2.2. Issue of Compensation, if any to laid off workersIssue of Compensation, if any to laid off workers

Closure may seem a drastic option but makes good Closure may seem a drastic option but makes good economic sense in many cases. economic sense in many cases.

This is because Restructuring is not a panacea. It This is because Restructuring is not a panacea. It involves pumping more money into a company that involves pumping more money into a company that may not have the potential to return to profitability. may not have the potential to return to profitability.

Objectives of Insolvency LawsObjectives of Insolvency Laws

Corporate insolvency law has certain overriding Corporate insolvency law has certain overriding objectives:objectives:

1.1. To To restore the debtor company to profitable restore the debtor company to profitable tradingtrading where this is practicable where this is practicable

2.2. To To maximize the return to creditorsmaximize the return to creditors as a whole as a whole where the company itself cannot be saved where the company itself cannot be saved

3.3. To establish a fair and equitable system for the To establish a fair and equitable system for the ranking of claimsranking of claims and the and the distribution of assetsdistribution of assets among creditors, involving a redistribution of rights; among creditors, involving a redistribution of rights;

(continued)(continued)

4. To provide a mechanism by which the 4. To provide a mechanism by which the causes of causes of failure can be identifiedfailure can be identified and those guilty of and those guilty of mismanagement brought to book, and where mismanagement brought to book, and where appropriate, deprived of the right to be involved in appropriate, deprived of the right to be involved in the management of other companies the management of other companies

INDUSTRIES (DEVELOPMENT AND INDUSTRIES (DEVELOPMENT AND REGULATION) ACTREGULATION) ACT

Passed to empower the government to implement its policies Passed to empower the government to implement its policies relating to industry. relating to industry.

Allowed Govt. control over industries and made provisions for Allowed Govt. control over industries and made provisions for intervention.intervention.

It introduced industrial licensing for proper industrial growth.It introduced industrial licensing for proper industrial growth.

This Act, amended from time to time is one of the most This Act, amended from time to time is one of the most effective weapons the Government possesses.effective weapons the Government possesses.

Brought under Central control, the development and Brought under Central control, the development and regulation of the influential industries pertaining to economic regulation of the influential industries pertaining to economic growthgrowth

OBJECTIVESOBJECTIVES

Provides Central Government with the means to implement Industrial Provides Central Government with the means to implement Industrial PolicyPolicy

The principal objectives are:The principal objectives are:To take necessary steps for the development of industries.To take necessary steps for the development of industries.To regulate the pattern and direction of industrial development.To regulate the pattern and direction of industrial development.To control the activities, performance and results of industries To control the activities, performance and results of industries undertakings in the public interest.undertakings in the public interest.

PURPOSE: PURPOSE: Envisages balanced growth all over India. Envisages balanced growth all over India. Optimum use of available resources and infrastructure.Optimum use of available resources and infrastructure.Ensures industries don’t suffer from financial mismanagement, Ensures industries don’t suffer from financial mismanagement,

technical inefficiency and/or operational defects.technical inefficiency and/or operational defects.

Need for new actNeed for new act

In the past, the govt. took over the management of a number of In the past, the govt. took over the management of a number of sick undertakings under IDRA, with the objectives of reviving them sick undertakings under IDRA, with the objectives of reviving them by providing management support and financial assistance through by providing management support and financial assistance through banks and financial institutionsbanks and financial institutions

However in due course the govt. fell that it was a mistake to have However in due course the govt. fell that it was a mistake to have gone on taking over the sick units and that the govt. should not be gone on taking over the sick units and that the govt. should not be burdened with the mounting losses of the sick units.burdened with the mounting losses of the sick units.

While some units were nursed back to health ,a number of others While some units were nursed back to health ,a number of others continued to suffer huge losses.continued to suffer huge losses.

Takeover of sick units is not favourable for the government.Takeover of sick units is not favourable for the government.

Only such units which are found to be potentially viable need to be Only such units which are found to be potentially viable need to be taken up for formulation of rehabilitation packages to restore them taken up for formulation of rehabilitation packages to restore them back to health.back to health.

The Solution -- SICAThe Solution -- SICA

In the wake of sickness in the country’s industrial climate In the wake of sickness in the country’s industrial climate prevailing in the eighties, the Government of India set up in prevailing in the eighties, the Government of India set up in 1981, a Committee to examine the matter and recommend 1981, a Committee to examine the matter and recommend suitable remedies therefore. Based on the recommendations suitable remedies therefore. Based on the recommendations of the Committee, the Government of India enacted a special of the Committee, the Government of India enacted a special legislation namely, the Sick Industrial Companies (Special legislation namely, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) commonly known as the Provisions) Act, 1985 (1 of 1986) commonly known as the SICASICA

The main objective of SICA is to determine sickness and The main objective of SICA is to determine sickness and expedite the revival of potentially viable units or closure of expedite the revival of potentially viable units or closure of unviable units (unit here in refers to a Sick Industrial unviable units (unit here in refers to a Sick Industrial Company). It was expected that by revival, idle investments in Company). It was expected that by revival, idle investments in sick units will become productive and by closure, the locked sick units will become productive and by closure, the locked up investments in unviable units would get released for up investments in unviable units would get released for productive use elsewhere.productive use elsewhere.

Sick industrial companies Sick industrial companies act(1985)act(1985)

The Act & its objectiveThe Act & its objective For Industrial Companies becoming sick in India, the For Industrial Companies becoming sick in India, the

Government formulated the ‘Sick Industrial Companies Government formulated the ‘Sick Industrial Companies (Special Provisions) Act, 1985’ (or SICA) which got (Special Provisions) Act, 1985’ (or SICA) which got amended in the year 1993, with the following prime amended in the year 1993, with the following prime objectives:objectives:To timely detect the sick and potentially sick industrial To timely detect the sick and potentially sick industrial companies,companies,To speedily take preventive, ameliorative, remedial & To speedily take preventive, ameliorative, remedial & other measures andother measures andTo enforce the measures so determinedTo enforce the measures so determined

The objectives of this Act (SICA) as incorporated in its preamble, The objectives of this Act (SICA) as incorporated in its preamble, emphasizes the following points:emphasizes the following points:SICA had been enacted in the public interest to deal with the problems of SICA had been enacted in the public interest to deal with the problems of industrial sickness with regard to the crucial sectors where public money industrial sickness with regard to the crucial sectors where public money is locked up. is locked up. It contains special provisions for timely detection of sick and potentially It contains special provisions for timely detection of sick and potentially sick industrial companies, speedy determination and enforcement of sick industrial companies, speedy determination and enforcement of preventive, remedial and other measures with respect to such companies. preventive, remedial and other measures with respect to such companies. Those measures are to be taken by a body of experts. Those measures are to be taken by a body of experts. The measures are mainly The measures are mainly

(a) Legal(a) Legal (b) Financial restructuring(b) Financial restructuring (c) Managerial(c) ManagerialThe 1993 Amendment to the Act lays down that an inquiry shall be deemed The 1993 Amendment to the Act lays down that an inquiry shall be deemed

to have commenced upon receipt by the Board of any reference of to have commenced upon receipt by the Board of any reference of information or upon its own knowledge reduced to writing by the Boardinformation or upon its own knowledge reduced to writing by the Board

Sick Industrial Company: Sick Industrial Company: An industrial company (being a company registered for not less than An industrial company (being a company registered for not less than five years) and having at the end of any financial year accumulated five years) and having at the end of any financial year accumulated losses equal to or exceeding its entire networth. losses equal to or exceeding its entire networth.

It must be an industrial company which is as specified in the First It must be an industrial company which is as specified in the First Schedule but does not include an ancillary industrial undertaking or Schedule but does not include an ancillary industrial undertaking or a small scale industrial undertaking as defined under IDRA.a small scale industrial undertaking as defined under IDRA.

The company should be in an existence for atleast 5 years since the The company should be in an existence for atleast 5 years since the date of incorporation.date of incorporation.

Potentially Sick Industrial Company’Potentially Sick Industrial Company’

It It means an industrial company whose accumulated losses is more means an industrial company whose accumulated losses is more than fifty percent or more of its peak net worth during the than fifty percent or more of its peak net worth during the immediately preceding four financial years.immediately preceding four financial years.

Important Provisions of SICAImportant Provisions of SICAConstitution of two quasi-judicial bodies – BIFR and AAIFR and their Constitution of two quasi-judicial bodies – BIFR and AAIFR and their Benches. Benches. Procedure of the Board and the Appellate Authority. Procedure of the Board and the Appellate Authority. Filing of references and criteria of sickness. Filing of references and criteria of sickness. Provision of enquiry into company’s health. Provision of enquiry into company’s health. Appointment of Special Directors and OAs.Appointment of Special Directors and OAs.Preparation of sanctioned scheme.Preparation of sanctioned scheme.Provision for monitoring of schemes.Provision for monitoring of schemes.Rehabilitation by giving financial assistance. Rehabilitation by giving financial assistance. Winding up of sick industrial companies. Winding up of sick industrial companies. Protection to safeguard the interests of the sick companies.Protection to safeguard the interests of the sick companies.Provisions for dealing with potential sickness.Provisions for dealing with potential sickness.Provision for seeking information and giving information – Central Provision for seeking information and giving information – Central Govt., RBI, FIs State institutions and sick companies and in case of Govt., RBI, FIs State institutions and sick companies and in case of amalgamation other companies.amalgamation other companies.

Important Provisions of SICAImportant Provisions of SICA

The implementation of SICA involved setting up of two The implementation of SICA involved setting up of two bodies:bodies:

1.1. BIFR – The Board for Industrial and Financial BIFR – The Board for Industrial and Financial ReconstructionReconstruction

2.2. AAIFR – The Appellate Authority for Industrial and AAIFR – The Appellate Authority for Industrial and Financial ReconstructionFinancial Reconstruction

BIFR BIFR

The SICA provides for the establishment by the Central The SICA provides for the establishment by the Central Government of a Government of a Board and Financial Reconstruction Board and Financial Reconstruction (BIFR)(BIFR) to exercise the jurisdiction and powers and to exercise the jurisdiction and powers and discharge the functions and duties conferred or imposed discharge the functions and duties conferred or imposed on the Board by the Act.on the Board by the Act.It consists of a chairman and not less than two and not It consists of a chairman and not less than two and not more than fourteen members appointed by the Central more than fourteen members appointed by the Central Government.Government.The Board of experts named the Board for Industrial The Board of experts named the Board for Industrial and Financial Reconstruction (BIFR) was set up in and Financial Reconstruction (BIFR) was set up in January, 1987 and functional with effect from 15th January, 1987 and functional with effect from 15th May 1987.May 1987.

Reference to the BIFR under the SICAReference to the BIFR under the SICA Under the Act, other than the Board of Directors of the Company,the Under the Act, other than the Board of Directors of the Company,the

following authorities/institutions may refer a sick company to the BIFR:following authorities/institutions may refer a sick company to the BIFR:The The Central GovernmentCentral GovernmentThe The Reserve Bank of IndiaReserve Bank of India State GovernmentState Government (where all or any of the undertakings belonging to (where all or any of the undertakings belonging to such company are situated in such State) such company are situated in such State) Public financial institutionPublic financial institution (where it has an interest in the Company by (where it has an interest in the Company by any financial assistance or obligation, rendered by it or undertaken by it) any financial assistance or obligation, rendered by it or undertaken by it) A A State level InstitutionState level Institution (where it has an interest in the Company by any (where it has an interest in the Company by any financial assistance or obligation, rendered by it or undertaken by it) financial assistance or obligation, rendered by it or undertaken by it) A A Scheduled bankScheduled bank (where it has an interest in the Company by any (where it has an interest in the Company by any financial assistance or obligation, rendered by it or undertaken by it)financial assistance or obligation, rendered by it or undertaken by it)

BIFR ProcedureBIFR Procedure

On the receipt of a reference or on receipt of information On the receipt of a reference or on receipt of information or kits own knowledge as to the financial condition of the or kits own knowledge as to the financial condition of the company, the Board is authorized to make an company, the Board is authorized to make an inquiry for inquiry for determining whether the industrial company has become determining whether the industrial company has become sicksick. .

The Board also has the power to require any operating The Board also has the power to require any operating agency to inquire into and make a report on such matter agency to inquire into and make a report on such matter as the BIFR may specify. as the BIFR may specify.

BIFR Procedure (contd)BIFR Procedure (contd)

If after such enquiry the BIFR is satisfied that the If after such enquiry the BIFR is satisfied that the company has become a sick industrial company, it may company has become a sick industrial company, it may decide:decide:

1.1. If it is practicable for the company to make its net worth If it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable exceed the accumulated losses within a reasonable time, it may give the company such time as it deems fit time, it may give the company such time as it deems fit to make its networth exceed the accumulated losses. A to make its networth exceed the accumulated losses. A Rehab scheme may also be sanctionedRehab scheme may also be sanctioned

2.2. If it is necessary in public interest to close the company, If it is necessary in public interest to close the company, it is recommended for closure, provided it is not it is recommended for closure, provided it is not practicable to turnaround the company from Industrial practicable to turnaround the company from Industrial Sickness. Sickness.

Measures Taken By BIFRMeasures Taken By BIFR

The measures that are prescribed for rehabilitation under Section 18 of The measures that are prescribed for rehabilitation under Section 18 of the Act arethe Act are financial reconstructionfinancial reconstruction of the sick industrial company of the sick industrial companythe the proper managementproper management of the sick industrial company by change in of the sick industrial company by change in or take over of the management of the sick industrial company or take over of the management of the sick industrial company the the amalgamationamalgamation of the sick industrial company with any other of the sick industrial company with any other company or vice versacompany or vice versathe the sale or leasesale or lease of part/whole of any industrial undertaking of the of part/whole of any industrial undertaking of the sick industrial company sick industrial company rationalizationrationalization of managerial personnel, supervisory staff and of managerial personnel, supervisory staff and workmen in accordance with law workmen in accordance with law Other measures as may be necessary in connection with the Other measures as may be necessary in connection with the measures specified above.measures specified above.

Inquiry

References received

Monitoring

Failed & reopened

Discharged onRevival

Registered Reg. declined

BIFR PROCEDUREBIFR PROCEDURE

Recommended for closure

Rehab scheme

sanctionedDismissed

AAIFRAAIFR

The SICA also provides for the establishment of an The SICA also provides for the establishment of an appellate authority called the The appellate authority called the The Appellate Authority Appellate Authority for Industrial and Financial Reconstructionfor Industrial and Financial Reconstruction consisting of a chairman and not more than three consisting of a chairman and not more than three members. members.

The AAIFR was setup forThe AAIFR was setup for hearing appeals against hearing appeals against the orders of the BIFRthe orders of the BIFR..

BIFR--- ProblemsBIFR--- Problems

BIFR either identifies extremely sick firms or mistakenly BIFR either identifies extremely sick firms or mistakenly declares non-sick companies as sickdeclares non-sick companies as sick

Asymmetry between lender and borrower -- at the Asymmetry between lender and borrower -- at the expense of lenderexpense of lender– Lender: NPA after 180-days defaultLender: NPA after 180-days default– Borrower: NPA after net worth Borrower: NPA after net worth 0 0

SICA definition – Problems for SICA definition – Problems for BIFRBIFR

Either SICA Either SICA catches it too catches it too late…late…

Default starts here

SICA catches here

Net worth

Years

Or, companies Or, companies fudge accounts fudge accounts to get shelter to get shelter under BIFRunder BIFR

Reference Reference mandatorymandatory

BIFR delays: Jan 97 to Mar 98BIFR delays: Jan 97 to Mar 98

14681664

0

365

730

1095

1460

1825

Sanctioned Winding-up

Day

s lo

st

Jul 87 to Jul 92:- Mean delay: 851 days

Jan 97 to Mar 98:- Mean delay : 1664 days

Pending cases at BIFRPending cases at BIFR

332510

2720914111015

166

020406080

100120140160180

Where does BIFR stand?Where does BIFR stand?

No. of references to BIFR No. of references to BIFR shootingshooting up since 1996 up since 1996

97

400370

233

050

100150200250300350400450

1996 1997 1998 1999Years

Ref

erec

es

Reasons For DelaysReasons For Delays

There are a number of reasons why the process of There are a number of reasons why the process of restructuring and liquidation of sick firms is not only slow, restructuring and liquidation of sick firms is not only slow, but extremely difficult.but extremely difficult.

1) At every level of mediation and decision-making, 1) At every level of mediation and decision-making, BIFR uses a consensus approach implying thereby that BIFR uses a consensus approach implying thereby that all parties i.e., the management, workers, creditors, and all parties i.e., the management, workers, creditors, and shareholders must agree to a restructuring plan before shareholders must agree to a restructuring plan before any restructuring or liquidation can begin.any restructuring or liquidation can begin.

2) Hostile trade unions with strong union practices have 2) Hostile trade unions with strong union practices have systematically opposed restructuring in various degrees.systematically opposed restructuring in various degrees.

Reasons For Delays contd…Reasons For Delays contd…

3) State governments have followed very rigid practices 3) State governments have followed very rigid practices

4) The slow moving judicial process have all created 4) The slow moving judicial process have all created strong barriers to restructuring and liquidation.strong barriers to restructuring and liquidation.

The National Renewal Fund, The National Renewal Fund, 1992 1992

The National Renewal Fund (NRF) was established in The National Renewal Fund (NRF) was established in 1992 and became operational only in early 1993 to:1992 and became operational only in early 1993 to:

1) Provide assistance to cover the costs of retraining and 1) Provide assistance to cover the costs of retraining and redeployment of employees arising as a result of redeployment of employees arising as a result of modernization, technology up gradation and industrial modernization, technology up gradation and industrial restructuring.restructuring.

2) Provide funds, where necessary, for compensation of 2) Provide funds, where necessary, for compensation of employees affected by restructuring or closure of employees affected by restructuring or closure of industrial units, both in the public and private sectors.industrial units, both in the public and private sectors.

3) Provide funds for employment generation schemes both 3) Provide funds for employment generation schemes both in the organized and unorganized sectors in order to in the organized and unorganized sectors in order to provide a social safety net for labor . provide a social safety net for labor .

National Equity FundNational Equity Fund

National Equity Fund was established in 1986-87, with National Equity Fund was established in 1986-87, with the contribution of Rs.5 cr each by the Central Govr. and the contribution of Rs.5 cr each by the Central Govr. and the IDBI.the IDBI.Aims at small entrepreneurs for setting up new projects Aims at small entrepreneurs for setting up new projects in tiny / small scale sector and rehabilitation of potentially in tiny / small scale sector and rehabilitation of potentially viable sick SSI units irrespective of the location.viable sick SSI units irrespective of the location.Under this scheme, assistance will be provided in the Under this scheme, assistance will be provided in the form of loans to eligible small and tiny units with the form of loans to eligible small and tiny units with the project cost not exceeding 5 lac., irrespective of project cost not exceeding 5 lac., irrespective of locations.locations.