ASSOCHAM suggests revival plan for sick units

Last Updated: Tue, Apr 23, 2013 13:01 hrs

Kolkata, Apr 23 (IBNS) Ninety six per cent of the existing sick estimated to be over 7900, micro and small units and 460 medium sized are not in the condition of revival in West Bengal and, therefore, the state government should set up e-SME-clusters and a special cell to help and facilitate remaining 4% of the units back into operation. said apex trade body Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The ASSOCHAM has stated that the industrial sickness in the state has not only affected capital formation and under utilization of the available resources but has sent highly discouraging signal to the entrepreneurs within or outside the state.

ASSOCHAM strategy paper on "Reviving Sick Units in West Bengal" submitted on Tuesday to West Bengal Industry and Commerce Minister Partha Chatterjee states that over Rs.725 crores are blocked against these sick units and over 1 lakh people have lost their livelihood.

The paper was formally released by ASSOCHAM office bearers - Sunil Kanoria (Vice President), Sanjay Jhunjhunwala (Chairman), Debmalya Banerjee (Co-Chairman of the Eastern Region Development Council) and D.S. Rawat (National Secretary General) - here on Tuesday.

It is estimated that in West Bengal there were 27.53 lac micro and small units that employed 54.94 lac people in 2005-06. The share revealed that West Bengal accounted for 16.1 percent and 15.1 percent respectively of total un-organised manufacturing units in the country and the people employed in it.

The 4th MSME survey has also indicated that on an average a micro enterprise employs 6.3 employees, while a small firm employs 49.6 people in West Bengal.

The medium sized firms employ, on average, 142.9 employs. Going by these estimates, the estimated loss of employment due to the sickness of 7904 firms stands at 71670 in the registered units alone.

The factors attributed for the industrial sickness are primarily lack of demand and huge infrastructure gap (41.94%), shortage of working capital (20.49%), marketing problems (11.48%), management problems (6.46%), power shortage (5.71%), labour problems (5.64%), non-availability of raw material (5.11%), equipment problems (3.17%)

The chamber has stated that with the decentralization of development processes, many progressive states of late have started taking proactive role in addressing industrial sickness in their states.

Otherwise, it has been reported that the entrepreneurship declines as industrial sickness discourages entrepreneurship. Industrial sickness also results in large scale unemployment and industrial unrest, said ASSOCHAM.

"Similarly, at the aggregate level, as the loanable funds of banks and financial institutes get blocked in sick units, banks/financial institutions are not able to recycle their funds with the result that even a good project cannot be funded by them. Therefore, prevention of sickness and rehabilitating sick projects assume greater importance," it said.

The peculiarity of West Bengal state is that infrastructure deficiency, a common issue across states, has been joined by rigid work culture to further vitiate the issue, it said.

"Despite the general perception that WB is a power-surplus state, the quality of power needs to improve, alongside significant augmentation in power-supply capacity and massive improvements in transmission and distribution systems.

"In respect to ports, proper infrastructure is yet to be put in place at Kolkata and Haldia dock complexes. Inland container yards at Shiliguri and Jalpaiguri need massive expansions," said the chamber.

The desired policy measures recommended by ASSOCHAM include rehabilitation of small enterprises should be done at the level of the banks/lenders.

The state must mainly complement the efforts of these financial institutions by partnering in the process, the scheme shall be applicable only to micro and small industries that are not covered under BIFR, a separate Cell may be created for overseeing the rehabilitation of sick MSMEs in the state, it said.

The Cell will ensure that there is no delinquency by any Government department in providing relief and concessions, said ASSOCHAM.

As a first step towards formulating the policy, the state must segregate sick units into sectors of state's core competence and others. Accordingly, in a phased revival package, priority must be given for reviving the sick units in the sectors where West Bengal has established its competence, it said.

The concessions announced under the revival package must include all amounts outstanding as dues to all statutory authorities that include Regional Provident Fund Commissioner, power distribution company and single Window Concept be introduced for implementing the revival package.

For incentivising the banks/financial institutes to take rehabilitation measures, the chamber said, they should be given priority on cash flows/ security in respect of additional finance provided by them as a part of rehabilitation package, vis-a-vis the lenders of existing finance.

As rehabilitation of micro and small enterprises is key to both social and economic wellbeing, there should be no provisioning requirement for sacrifices made by the statutory departments, according to ASSOCHAM.

The revival package must take care of the interest costs for at least 6 months after commercial production of revived unit. Even if 4% of the total sick units were revived, a positive signal will reach to the investors within and outside the country about the seriousness of the Government, it said.

In addition to the above outlined fiscal concessions, ASSOCHAM has proposed that exemption from stamp duty on different agreements to be registered as a consequence of revival scheme must also be included in the revival package, contain financial restructuring, business restructuring and manpower rehabilitation as integral parts.

The mechanism should be enabling the restructured firm to approach financial institutions for further funds with a clean balance sheet, it said.

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