According to reports, last year, every one hour three tiny units became sick. In other words, every day 79 tiny units became sick, according to trade associations, quoting Reserve Bank of India data.
Power shortage was one of the major reasons for this. The RBI calls a unit sick, if any of the borrower accounts of the unit remains sub-standard for over six months; or there is erosion in net worth due to accumulated losses to the extent of 50 per cent of its net worth during the previous accounting year.
There are nearly 1.28 crore micro, small and medium size enterprises (MSME), both registered and unregistered, units in India.
As on March 31, 2012, the total outstanding bank credit from these units was over Rs 7,000 crore. Industrial sickness is a matter of national concern. It affects owners, employees, creditors and suppliers, and also causes wastage of national resources and social unrest, said Mr T.V. Hariharan, Vice-President, Federation of Associations of Small Industries of India (Southern Region).
Mr A. Muthuvezhappan, Deputy Director, MSME – Development Institute, said that the reasons for industrial sickness could be due to wrong location and planning, defective plant and machinery, power cuts, irregular supply of raw materials, market constraints and government policy.