Steps to Revive Sick Industries in Andhra Pradesh

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Steps to Revive Sick Industries in Andhra Pradesh _ APPSC G1 Mains _ paper

3_ section3_ Unit 1

1.Introduction

Andhra Pradesh has embarked upon a Mission, which is, to be at the forefront of industrialdevelopment in the country by the year 2020. The Government is conscious that fulfillin this

Mission needs not only ideas and dreams but also a lot of hard, realistic plannin uided by wellspelt out policy directions.

!n "##$, the Government enunciated its !ndustrial Policy %Taret 2000% which set the tone for

adoptin a new approach to industrial development in the liberali&ed economy. 'ne of the

ob(ectives of this )ew !ndustrial Policy has been to promote the rowth of small scale andcottae industries to help the small entrepreneurs.

The *tate today has nearly 2,+0,000 *mall and Tiny industries established in the *tate. The

contribution of the *mall *cale *ector to the *tate%s economy cannot be overestimated.mployin a work force of over 22 lakh, the sector contributes about -s./00 r to the )*1Pand accounts for rouhly +$03 of the *tate%s e4port. The potential of the sector to utilise

locally available resources, skills and entrepreneurial ability is of enormous importance for a

*tate faced with the dauntin task of removin reional imbalances throuh dispersal ofeconomic activity and of providin employment opportunities. Added to this, the low operational

costs and fle4ibility of adoptin production processes suited to differin re5uirements, make the

sector well suited to the capabilities of small entrepreneurs.

The sector has, however, been beset with several difficulties. 6hile infrastructural and resourcecentered bottlenecks are common with lare and medium industries, the **! sector today faces

certain peculiar problems which are innate to it vi&. lack of access to credit, marketin problems,complyin with cumbersome procedures, harassment by inspectin Governmental functionaries,

technoloical obsolescence, riid labour laws impedin operational fle4ibility etc. These uni5ue

problems re5uire special solutions. They therefore call for adoption of specific and well thouhtout strateies to meet the needs of the *mall *cale *ector.

7urther, amidst the eneral euphoria created by the liberali&ation policies of Government of !ndia

initiated in "##", there lurks amonst the small entrepreneurs considerable fear that the decontrol

of industry, increased competition, market oriented reforms and lobali&ation of the economyare likely to adversely affect the small scale sector in the country.

!n order to develop the small scale sector, Government feels that it is imperative to spell out a

specific policy framework which would set the tone and direction of the Governmental effort to

help this sector achieve its full potential. !n order to make the policy more realistic, Governmenthave one throuh an elaborate process of consultations with **! Associations, officials of

related Government 1epartments and individual entrepreneurs.
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2. O!ectives o" the S.S.I. Po#ic$

The Policy for *mall nterprises aims to create a conenial atmosphere conducive to the healthy

rowth of the *mall *cale *ector in the *tate. The broad policy ob(ectives are enumerated below8

To achieve an annual rowth rate of "$3. To assist the small scale industries in the *tate to become competitive, domestically as

well as internationally.

To increase employment eneration particularly by promotin the labour intensive

sements.

To improve the e4port performance of the **! sector by providin ade5uate support

services.

To create a more conenial and hasslefree environment for the functionin of the **!

sector.

To help the **! sector ac5uire new technoloies and skills so as to compete effectively in

the market place.

To promote appropriate linkaes between the lare and small scale sectors in the interest

of harmonious industrial development

To strive to promote an appropriate institutional mechanism to revive sick industries

To encourae **! units to row vertically and raduate, in the course of time, from small scale to

medium and lare scale units.

3. Strate%$ "or achievin% the po#ic$ o!ectives

6ork towards phased dereservation of items reserved for e4clusive manufacture in

*mall *cale *ector.

-ecommend revision of investment limits for *mall *cale, Ancillary and Tiny !ndustries.

-ationali&e fiscal concessions.

*trive to put in place appropriate arranement for timely and ade5uate flow of credit.

Assist the *mall *cale *ector in their marketin efforts by providin support services.

Provide ade5uate, ood 5uality infrastructure support at a reasonable cost for more

efficient functionin of the **! sector.

Provide technical support for moderni&ation and access to -91 facilities.
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Give a thrust to :uman -esource 1evelopment by settin up new technical trainin

institutions and by associatin small scale entrepreneurs in the Advisory ;oards of these

institutions.

*implify -ules, -eulations and Procedures to remove the fetters on the smooth

functionin of the sector.

;rin about revision in


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definition of small scale, thus sacrificin the efficiency that could have arisen from economies of

scale for the sake of the concessions offered by Government. Moreover, in a marketoriented

economy it would be in the interest of industrial efficiency to let the market decide what shouldbe the appropriate scale of production for a particular item. This is likely to vary from one part of

the country to another dependin on markets, raw materials and manaerial skills. !n the liht of

the above the *tate Government will recommend to the ?nion Government for adoption of arational policy of dereservation as follows8

i. !tems which are not produced at present in the small scale sector at all or which cannot be

produced in the small scale sector in the future because of the compulsions of

moderni&ation and which entails substantial investments beyond the limits prescribed for**! *ector, could be dereserved immediately. :owever, the **! Associations must be

consulted before any item is dereserved.

ii. Those items, which can be produced either by lare= medium or by *mall *cale!ndustries, could be dereserved in a phased manner. !n the transition period assistance

should be iven to the **! units for upradin technoloy, e4pandin production, trainin

staff and improvin manaerial efficiencies so that they are in a position to face thecompetition after dereservation.

iii. Manufacture of traditional items usin low technoloy and those activities which provide

employment to weaker sections should continue to be reserved for the **! sector.

,. -isca# concessions

Government of !ndia has been ivin e4cise duty e4emption to small scale industries withturnover upto -s.$0 lakhs and concessional rate of ta4 for turnover upto -s " crores. The *tate

Government has also introduced, in the year "##$, a liberal scheme of fiscal concessions to allnew industries, which includes @ years of sales ta4 e4emption or " years of sales ta4 defermentlimited to "+$3 of fi4ed capital investment and an investment subsidy of 203 of the fi4ed

capital investment limited to a ceilin of -s.20 lakhs. A power rebate of 2$3 is also iven for a

period of + years restricted to a limit of -s.+0 lakh in respect of small scale industries.

!t is observed that there is a certain amount of misuse of the scheme by industries thouh it isdifficult to 5uantity it. !nstances have been reported where the entrepreneurs have closed down

the e4istin units at the end of the concession period and have setup new units in order to draw

the benefits once aain.

The **! Associations have pointed out that many small scale units are not ettin much benefitout of this scheme since a lare ma(ority of the small scale units are in the service activity and

are thus not covered by the scheme. 7urther, ta4 concessions create a discriminatory situation for

the older units which have to pay hiher levels of ta4es and are thus forced out of competition,especially when the incidence of ta4 is hih.


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The policy has fostered a spirit of unhealthy competition amonst the *tate Governments in

e4tendin ta4 concessions, whether (ustified or not, to attract industries to their *tate. *uch a

policy leads to allocative inefficiency in respect of investible resources.

!n view of the above, the Government proposes to review the sales ta4 rates in the *tate to brin

about rationali&ation and harmoni&ation keepin in view the ta4 rates in the neihbourin *tates.This will improve the competitiveness of the industries located in the *tate and at the same time

ensure better ta4 collection throuh hiher compliance. AT will be introduced in a phasedmanner and the ta4 collection system simplified.

A dialoue will be initiated with the neihbourin *tates to adopt a uniform policy as reards

fiscal incentives so that, henceforth, investments are made on the basis of economic rather thanfiscal considerations and the unhealthy competition amonst *tates to attract industries throuh

fiscal incentives is curbed.

The Government will adopt a stratey to provide nonfiscal rather than fiscal incentives to new

industries, particularly by way of improved infrastructure in industrial estates at reasonable cost.Towards this oal, the Government will henceforth release investment subsidies under the

e4istin *tate !ncentive *cheme in respect of **! units, which are set up in AP!!%s industrial

estates, directly to AP!! towards ad(ustment aainst the payments due from the **! unit owners

for the cost of the developed plots. /03 of the subsidy will be released on the basis of the pro(ectcost to AP!! in advance without waitin for the unit to o into commercial production. Priority

will be iven for the release of such amounts to AP!! out of the budetary outlay available each

year with !ndustries 1epartment.

After the unit oes into commercial production, ommissioner !ndustries will scrutini&e the

incentive proposals as usual and release the balance 203 subsidy to AP!!. The AP!! will

transfer the title of the plot to the entrepreneur only after five years from the date the unit oesinto commercial production. !n case the unit does not o into commercial production, the AP!!will return the subsidy amount to ommissioner, !ndustries. This procedure for releasin

subsidies will be e4tended to private industrial estates also.

. Credit

A ma(or complaint of the **! units has been the lack of access to institutional credit, particularlyfor workin capital, delays in the sanction of loans and inade5uate 5uantum of credit. The **!

Associations state that thouh the Government of !ndia has directed the commercial banks to

advance at least 03 of the total credit to the priority sector, which includes lendin to **!s, the

commercial banks are fihtin shy of advancin loans to **!s because of the perceived hiherrisks in lendin to this class of industry especially in the conte4t of tihter capital ade5uacy

norms for the banks and the pressure to improve their profitability. The ommercial banks= *7

often try to hede their risks by insistin on collateral securities to fully cover the loans eventhouh these are not to be taken as per -;! norms for loans upto -s.$0,000. As reards workin

capital, they point out that for some industries, seasonal re5uirements of workin capital vary

considerably but the bank norms for assessin such seasonal re5uirements are not fle4ible.Adhoc limits to meet such seasonal re5uirements should be considered.


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The *7 is of the view that the 5uantum of security is not unusually hih and varies from 2$

@$3 based on the risk perception in respect of different types of ventures.

7urther, the **! Associations have e4pressed dissatisfaction with the interest rates applicable tothe **! borrowers which they find to be e4cessively hih. They are especially arieved about

the *!1;! refinance scheme wherein the banks have been charin a minimum of "/3 for termloans, upfront fees and penal interest of $3 even for a temporary period of default from the **!

borrowers. Thouh the prime lendin rate of the banks was reduced by -;!, the banks and*!1;! did not reduce the interest rate chared to the **! borrowers.

The *tate Government supports the followin measures to increase the flow of credit to **!s and

to remove some of the present constraints on such flow. The matter will be taken up withGovernment of !ndia and the -eserve ;ank of !ndia wherever necessary.

i. The share of tiny and cottae industries of the overall advances to **! units by the

commercial banks should be increased from the present level of 2.>3 Bas per survey of

Canuary, "##/ of -;! in Andhra PradeshD to atleast 03 throuh simplification ofprocedures, lowerin of interest rates, more fle4ible norms for assessment of their credit

re5uirements and repayment schedules, and for advancin composite loans upto -s."0

lakhs.Bcoverin tiny and cottae industriesD.

ii. A ollateral -eserve 7und should be created and administered by *!1;! to providesupport to first eneration entrepreneurs who do not have collateral securities to offer.

iii. ollateral for loans should not be insisted for loans upto -s." lakh as aainst the presentlimit of -s.$0,000.

iv. *!1;! should be iven access to low cost funds so as to lower interest rates on refinanceto banks for loanin to tiny and cottae industries, for infrastructure schemes for **!

clusters, and for moderni&ation schemes for **! units.

v. More **! bankbranches should be set up with staff specially trained in and motivated for

**! lendin so as to cover every district and more than one branch in those districts

where the number of **! units e4ceeds "000.

vi. The -;! should set up independent Grievances -edressal Tribunals in each *tate which

will hear rievances of the **! entrepreneurs aainst *7 and commercial banks and

issue directions to resolve the problems after ivin a hearin to all the parties concerned.

vii. 1ebt -ecovery Tribunals should be set up in each *tate. The small scale entrepreneurs,

who have defaulted to a bank, should be iven ade5uate opportunity to e4plain their case

before the Tribunals.

viii. A credit ratin scheme for **!s should be introduced by banks with special benefits for

**! units who have ood track record in repayment of loans by way of lower interestrates, ad hoc credit limits, lower marins etc.

i4. !n order to ensure the continuous flow of institutional credit to the small industries%sector, effective monitorin will be done of recoveries of loans advanced by commercial


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banks under any welfare scheme or proramme such as PM-E and the like which are

sponsored by the *tate or entral Government, applyin the -evenue -ecovery Act

where necessary.

4. The redit Guarantee *cheme of 1!G needs to be revised to make it more effective.

/. Support "or *arketin%

The AP**!1 was set up in "#>" to assist the **! units in the procurement of controlled items

like steel, paraffin wa4 and pi iron and in the marketin of their products mainly to *tateGovernment departments and undertakins under the Marketin Assistance *cheme BMA*D and

investin capital in new **! units

6ith the decontrol of items such as steel and pi iron the -aw Materials *upply *cheme does

not have much relevance. **! Associations can also buy bulk 5uantities of steel, pi iron etc.,

from the manufacturers and sell to their members.

The Government departments have been fre5uently complainin aainst the 5uality of the

products supplied under the Marketin Assistance *cheme and have also ob(ected to the

charin of a hih commission of +3 by AP**!1. The overhead costs of the AP**!1 havebeen increasin every year and the AP**!1 is forced to increase its service chares for the

scheme. Most of the Govt. departments have e4pressed their preference to buy from the open

market. !t is also observed that there are defects in the implementation of the scheme such as theformation of syndicates by a few influential manufacturers who have tried to corner a lare

portion of the orders. !t is also found that some of the reistered suppliers are not actual

manufacturers but are traders.


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orders etc. can be combined with the marketin strenths of the lare units with their adherence

to 5uality standards, capacity to take lare orders etc. for mutual benefit of both. The *tate

Government will also persuade the !ndustry Associations to set up subcontractin e4chanes.

The Government will encourae development of **!s throuh a cluster approach so as to

facilitate implementation of development prorammes and make marketin of the products ofthese clusters easier

The *tate Government will setup an !nternational Trade 7aircumonvention entre in:yderabad, which will orani&e international e4hibitions, fairs and conferences to assist the local

industries to market their products in the international markets. !t will also assist the **! units in

participatin in forein e4hibitions and will orani&e visits of forein trade and industrydeleations to Andhra Pradesh and from Andhra Pradesh to other countries. The *tate

Government will address the Municipal orporations and Municipalities to set up permanent

4hibitioncumonvention entres in district head5uarters and lare industrial towns. 6hile

the local bodies will invest in the construction of such entres, the manaement of these entres

will be handed over to Associations of **! units or to professional aencies. 7ees will becollected from the **! units for utili&in the facilities and this revenue will be used for the

maintenance and upkeep of these entres.

0. e#a$ed Pa$*ents Pro#e*

The **! units complain of delayed payments by the lare and medium units and by Government

aencies. This problem ets particularly acute when there is a credit s5uee&e. Thouh

Government of !ndia has passed leislation to provide for compulsory payment of interest onsuch delayed payments, the settlement of disputes in cases of default in payment of interest is

difficult since the e4istin leal procedures throuh civil courts are cumbersome and e4pensive.

The *tate Government in consultation with the :ih ourt, will authori&e some of the e4istinspecial tribunals to take up such cases in areas where there is a concentration of **! units.

Thouh it has been made mandatory bylaw for the lare and medium units to declare the dues to

**! units in their audited balance sheets, it is observed that in practice this is not bein done by

several lare and medium companies. A mechanism must be evolved to ensure that this law is

enforced. A separate schedule should be included in the audited balance sheets of the lare andmedium companies for declarin the dues to the **! units and the interest accrued thereon under

the 1elayed Payment Act. The inclusion of such a schedule in the audited balance sheet may be

made mandatory on the auditors throuh the ode of Accountin Practices. The banks must beauthori&ed by law to automatically deduct the dues to the **! suppliers from the cash credit of

the concerned defaultin lare and medium unit. The Public *ector units and the local bodies

must accept bills of e4chane or must aree to payment to **! units only throuh banks. 7actorservices should be made widely available throuh speciali&ed aencies by removal throuh

suitable leislation of leal impediments relatin to stamp duty, reistration fee, assinment of

contracts etc.

1. In"rastructure support


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The Andhra Pradesh !ndustrial !nfrastructure orporation has been entrusted with the

responsibility of settinup industrial estates throuhout the *tate, providin basic infrastructure

such as sheds, internal roads, power, drainae etc. A common complaint of the **! entrepreneursis that the cost of developed plots sold by AP!! is hih compared to the cost of similar property

and facilities that can be privately ac5uired. Moreover, there is widespread criticism that the

infrastructure in the industrial estates is not properly maintained by the AP!!.

The Government will introduce a scheme to be called the Fritical !nfrastructure ;alancin*chemeF under which funds will be made available to industrial estates or to **! clusters

identified under the **! luster 1evelopment Proramme for the establishment of some critical

infrastructure which is considered essential to establish the viability of the infrastructure pro(ectand for the upradation of the infrastructures in the e4istin industrial estates.

The policy to provide infrastructure support to **!s throuh industrial estates will be continued

and strenthened. Theme Parks such as *oftware Park, Apparel 4port Park, ;iotech Park,


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*mall *cale !ndustries% 1evelopment Authority will be chaired by the hief *ecretary

and will have as members Principal *ecretaries=*ecretaries and :eads of 1epartments

and hief 4ecutive 'fficers of overnment or semiovernment aencies involved inthe development of small scale industries and in providin infrastructure to industry.

-epresentatives of Government of !ndia departments and aencies such as -ailways,

Postal *ervices, Telecommunications etc. will be invited whenever necessary.-epresentatives of small scale industry will be made members of the Authority.

*imilar Authorities to be called 1istrict *mall *cale !ndustries% 1evelopment Authority

will be set up at the 1istrict level with the ollector as the hairman and the General

Manaer, 1istrict !ndustries entre as the memberconvenor.

As reards electricity supply, the AP*; will supply electricity to such of those **! units

which have connected load between @$ :P and "$0 :P under


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2$,000 per unit for all those units which are located in Andhra Pradesh. !n order to encourae the

small scale industry to improve productivity levels, annual awards have been instituted by the

*tate Government for **! units which achieve hih levels of productivity, 5uality in products,innovative technoloy and hih safety standards.

The *tate Government will actively promote a close interaction between the -esearch !nstituteslocated in Andhra Pradesh such as the !ndian !nstitute of hemical Technoloy, entre for

ellular and Molecular ;ioloy, !nstitute of Tool 1esin etc., with the concerned sement of theindustry by arranin !ndustry!nstitute !nterface meetins for promotin transfer of new

technoloies from the laboratories to small industries.

The *tate Government has supported the !! initiative to set up the Andhra Pradesh Technoloy1evelopment entre which will assist industries, particularly the small scale units, in ettin

access to new technoloies, in neotiatin areements of transfer of technoloy, in over comin

problems in implementin new technoloies and in takin up research in specific areas of

interest to small scale industry.

A Technoloy 4chane will be setup by the Andhra Pradesh Technoloy 1evelopment entre

to make available information to the small entrepreneurs about the latest technoloical

developments worldwide and about the scope for transfer of technoloy. !ndustry Associations

such as !!, 7AP!, 7AP*!A etc. and private consultants and international orani&ations suchas the 6orld Assembly of *mall and Medium nterprises B6A*MD will be associated with the

Technoloy 4chane.

A Technoloy 1evelopment and Moderni&ation 7und has been set up by the *mall !ndustries1evelopment ;ank of !ndia B*!1;!D in "##$. 6ide publicity will be iven to this scheme to

encourae **!s to avail of the benefit under the scheme.

Assistance will be iven to **! units to take up enery conservation measures, to implement

pro(ects for utili&in nonconvential enery and to introduce pollution control measures. 6hiledoin so, the *tate Government will be supplementin the efforts bein made already by *!1;!,

!1;!, Government of !ndia etc. in this area.

**! units will be assisted throuh suitable software packaes to adopt !nformation Technoloy to

enhance their competitiveness.

12. 5u*an Resource eve#op*ent

Government has been investin in manpower development for the small scale industry by

settinup technical institute such as !T!s, Polytechnics, nineerin ollees etc. 6hile this hashelped in creatin a pool of technically 5ualified persons, it is found that the 5uality of trainin

has not been upto the mark and that the institutes are not able to meet the chanin needs of the

industry. The e5uipment used in the trainin institutes is also often obsolete. The **!entrepreneurs point out that ine4perienced technical staff (oin their units to ain e4perience and


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after some time they move on to et (obs in lare industries where salaries and per5uisites are

more attractive. The **! units thus suffer from hih turn over of employees.

The *tate Government will step up investments in !T!s, Polytechnics and enineerin collees,both in the public and in the private sector to meet the rowin need of the !ndustry for skilled

manpower.

The *tate Government will try to make these institutes more oriented towards meetin the needs

of the industry. Advisory ommittees will be set up for these institutes, with representatives ofthe concerned industry to advise on the course curriculum, e5uipment purchases, onthe(ob

trainin and to provide campus recruitment. *tudents of !T!s and Polytechnics will be imparted

practical trainin in local industries. TA=1A will be iven to *, *T, ; and women candidatesby the Government. Practicin **! entrepreneurs will be invited to teach or to take some classes

in the trainin institutes.


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disruptin production. There are complaints that durin inspections, frivolous ob(ections are

made and petty lapses hihlihted merely to e4tract illeal ratification.

The *tate Government setup a 'ne Man ommission to review all the e4istin industrial lawsand advise Government on the simplification, rationali&ation and consolidation of such laws. The

Associations of !ndustries in the *tate set up a Coint -eview ommittee to review the e4istinrules enacted by the *tate Government. 4peditious action will be taken to simplify the laws and

rules in the liht of the recommendation of the 'ne Man ommission and in the liht of therecommendations of the Coint -eview ommittee, set up by the Associations of !ndustries. The

recommendations reardin the entral laws will be communicated to Government of !ndia.

A system of accredited aencies will be introduced selectively, in specific technical areas, underwhich private aencies with credible track record will be authorised to undertake statutory

inspections and issue certificates on payment of fi4ed fees.

The various annual reports that have to be submitted by industries to the


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stae, if found feasible. The procedure for reistration of an **! unit will be simplified. A sinle

point reistration and a common reistration number to be adopted by all concerned departments

for a unit will be instituted.


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A complaint cell will be set up in the office of the hief Minister and of Minister B**!D, to

receive complaints from office bearers of reistered **! Associations aainst any overnment

official indulin in unwarranted harassment of an **! entrepreneur.

At the same time, the need for the industrial units in the *tate to implement effectively the laws

relatin to labour welfare and environment protection is underlined . The industry should aim atevolvin a selfreulatory mechanism to achieve the ob(ectives of these laws.

1&. Revie6 o" 7aour 7a6s

The strenth of the small scale units lies in their fle4ibility in production. :owever, the e4istin

labour laws restrict such fle4ibility. There is a multiplicity of labour laws enacted by the entraland *tate Governments which need to be reviewed and combined into one sinle piece of

leislation. The 'ne Man ommission has e4amined this issue. The recommendations will be

e4amined and action will be taken to simply the laws and, wherever necessary, communicated toGovernment of !ndia.

1). Assistance to Specia# Cate%ories o" 8ntrepreneurs 9:o*en' ;Cs' SCs and S(so!ana and other Se#" 8*p#o$*ent

Sche*es

iorous efforts will be made to improve the performance of selfemployment prorammes

coverin trainin, identification of vocations, provision of counselin services and tyin upproposals with banks and other local aencies. The implementin aency at the district level

1!, in consultation with the banks and associations of **!s, will develop counselin services to

the beneficiaries. Mass awareness and motivational campains will be orani&ed to make theopportunities known widely to prospective beneficiaries, as was done by the *cheduled aste

orporation in Cune 'ctober, "##. As part of this effort, e4periences of successful self

employed persons, who had set up enterprises earlier will be pro(ected for demonstration.

1. (in$ and Cotta%e Industries

-ural artisan comple4es need to be strenthened and e4panded. The focus will be on developinthe artisans throuh a cluster approach to ensure ade5uate infrastructure and linkaes providin

improved tools, credit, marketin facilities, skill development etc.

The *tate Government will encourae a consortium approach for bulk marketin domestically

and internationally by the tiny units. Marketin fairs in rowth centres in the districts will beencouraed.

1/. State Advisor$ ;oard "or SSIs

The *tate Government has constituted a *tate Advisory ;oard for **!s with the hief Minister

as the hairman. This ;oard will be used as a forum for reater interaction between the

Government aencies and the **! Associations. The ;oard should meet atleast twice in a year.

A *ubommittee of the Advisory ;oard consistin of the Minister B**!D as hairman, *ecretary!ndustries as Memberonvenor and the representatives of the **! Associations will be

constituted. This *ubommittee will meet atleast once every two months. The meetins will be

held in different parts of the *tate to ive an opportunity to local **! units to submit theirrepresentations to the *ubommittee.

-eional meetins will also be orani&ed with local !ndustry Associations which will be

attended by senior Government officials from departments such as !ndustry, ommercial Ta4es,


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The level of sickness in Andhra Pradesh is reported to be as hih as 2@3 compared to the all

!ndia fiure of 2"3 :owever, as per the -;! -eport on urrency and 7inance, "##+#, the total

number of sick units and the amounts outstandin with the sick units has been declinin since"##2.

The Government had re5uested the Administrative *taff ollee of !ndia to conduct a study onthe causes of sickness amon **! units in the *tate. The reasons for the sickness, identified by

the study, are poor 5uality infrastructure, particularly power, lack of technoloical upradation,hih ta4es, riid labour laws and inade5uate flow of credit especially workin capital,

insistence on collateral securities by banks and *7, inade5uate marketin efforts and facilities,

manaerial inefficiencies, delay in settlement of receivables, poor pro(ect appraisal,unreasonably short moratorium periods to cover estation, compoundin of interest, hih interest

rates, poor supervision and monitorin by bank officials, inade5uate support and uidance from

1! officials.

6hile Government will take action to ensure that these problems are solved at the root so that

sickness can be prevented, the *tate Government will also try to help viable sick units to berevived.

*tatutory provisions for the revival of sick units on the lines of ;!7- may not be suitable for the

small scale sector in view of the much larer number of units involved, as also the need for muchreater fle4ibility in dealin with the small scale sector. Government is of the view that the *tate

units since it has no statutory powers.

There is an urent need to set up an institutional framework to e4amine the cases of sick units

and to revive such of those units which can be made viable. A further dialoue will be held with

financial institutions, commercial banks, Government of !ndia, -;! and !ndustry Associations toevolve such an institutional framework e4peditiously.

A packae of concessions for sick **! units should be evolved by the aency identified for the

revival of sick **! units on a case by case basis. ommitments will have to be made by the

manaement of the sick units or new promoters, by the entral and *tate Governments and by

the financin institutions for the revival of the sick **! units. The concessions could include softloans, writeoff of previous bank loans, ta4 deferrals, reschedulements of other dues like

electricity, water etc. A F-ehabilitationF or F-econstruction 7undF should be setup to assist the

sick units with contributions by *!1;!, ommercial banks, entral and *tate Governments. !tshould be operated at the *tate


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*o far the role of **! Associations has been larely that of representin the rievances of their

members to the Government and seekin more concessions. !n future the Associations would be

encouraed to take on developmental activities to a reater e4tent such as orani&in e4hibitions,trainin prorammes, workshops for transfer of technoloy, creatin awareness amon members

about social responsibilities in areas such as environment protection, safety of workers etc. and

takinup maintenance of industrial estates, marketin comple4es, common effluent treatmentplants etc.

**! Associations will be iven due representation on the ;oards of orani&ations such as

AP*7, AP!!.

21.I*provin% ata ;ase

There is no system of reular collection of data relatin to **! units in the *tate reardinimportant indicators such as new investment, production, e4ports, employment creation, sickness

etc., This data is essential for monitorin the development of the sector and to analy&e the impact

of overnment policies.

fforts will be made to introduce a scientific data collection system in the office of theommissioner of !ndustries which will be computeri&ed so that it is easily available to any one

interested in it.

Steps to Revive Sick Industries in Andhra Pradesh

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