Sickness in SSI 3rd census

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

a. 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

b. 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

c. 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.

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

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

iii. 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. Name of State/ Sick units Incipient sick units Sick/ incipient Sick units as per
No. UT (where there is (continuousdecline sick units RBI criteria
erosion of in gross output) (erosion of (among units
networth or networth or with outstanding
delay in delay in instl. loan where
repaymentof repayment of there is erosion
instl. Loan) instl. Loan or of networth or
continuous delay in
decline in repayment of
gross output instl. Loan)
JAMMU &
1. 0.26 0.06 0.08 0.27
KASHMIR
HIMACHAL
2. 0.61 1.13 1.09 0.68
PRADESH
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
UTTAR
9. 4.61 3.05 3.13 4.30
PRADESH
10. BIHAR 1.85 2.50 2.50 1.89
11. SIKKIM 0.02 0.01 0.01 0.01
ARUNACHAL
12. 0.02 0.01 0.01 0.02
PRADESH
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
MADHYA
23. 3.98 5.43 5.34 3.80
PRADESH
24. GUJARAT 1.93 5.22 4.98 1.53
25. DAMAN & DIU 0.07 0.02 0.02 0.05
26. DADRA & NAGAR
0.03 0.01 0.02 0.02
HAVELI
27. MAHARASHTRA 13.70 6.62 7.31 14.17
ANDHRA
28. 6.04 9.76 9.27 4.10
PRADESH
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
ANDAMAN &
35. NICOBAR 0.02 0.03 0.03 0.02
ISLANDS
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 Sick units Incipient sick Sick/ incipient sick Sick units as per RBI
code (where there is units units (erosion of criteria(among units with
erosion of (continuous networth or delay in outstanding instl. loan
networth or decline in repayment of instl. where there is erosion of
delay in gross output) Loan or continuous networth or delay in
repayment of decline in gross repayment of instl. Loan)
instl. Loan) output)
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 Sick units Incipient sick Sick/ incipient sick Sick units as per RBI
code (where there is units units (erosion of criteria(among units with
erosion of (continuous networth or delay in outstanding instl. loan
networth or decline in repayment of instl. where there is erosion of
delay in gross output) Loan or continuous networth or delay in
repayment of decline in gross repayment of instl. Loan)
instl. Loan) output)
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 Sick units Incipient sick Sick/ incipient sick Sick units as per RBI
code (where there is units units (erosion of criteria(among units with
erosion of (continuous networth or delay in outstanding instl. loan
networth or decline in repayment of instl. where there is erosion of
delay in gross output) Loan or continuous networth or delay in
repayment of decline in gross repayment of instl. Loan)
instl. Loan) output)
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 Proportion of sick/ incipient sick units*
sickness
Total SSI Regd. SSI Unregd. SSI
Sector sector 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 Registered Unregd.Sector

Sector SSI Sector
1. No. of units having outstanding loan as on 31-3- 7,77,639 2,76,333 2,82,267
2002 (100 %) (35.5 %) (59 %)
2. No. of units having outstanding loan with 4,78,404 1,96,137 58,338
institutional sources as on 31-3-2002 (100 %) (41 %) (56 %)
3. No. of sick units (with erosion of net-worth by 1,04,769 46,431 5,92,899
more than 50 % or delay in repayment of (100 %) (44 %) (79 %)
institutional loan by more than 12 months)
4. No. of incipient sick units (decline in gross output 7,50,922 1,58,023 46,887
over three consecutive years) (100 %) (21 %) (55 %)
5. No. of sick units as per RBI criteria, i.e., those 85,290 38,403 6,30,568
that are sick among units having outstanding loan (100 %) (45 %) (77 %)
with institutional sources
6. No. of sick/ incipient sick units (with erosion of 8,22,896 1,92,328 5,01,306
net-worth by more than 50 % or delay in (100 %) (23 %) (64.5 %)
repayment of institutional loan by more than 12
months or decline in gross output over three
consecutive years)