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Andhra Pradesh: The state of sick SSIs

September 10, 2005 08:52 IST
Industrial sickness may be a global phenomenon. However, it is rampant in the small-scale industrial sector of Andhra Pradesh.

Sick SSIs account for over 38 per cent of the total small industries set up in the state so far.

According to MARCH, a marketing consultancy and research organisation, as many as 38,582 units out of the 1,01,499 SSIs established have become sick and closed their operations.

Ironically, it is the state capital which has the maximum number of sick SSIs. Of a total of 8,007 SSIs set up in Hyderabad, 4,460 units became sick.

Thus, 56 per cent of the SSIs established in the state capital have become sick. In contrast, the backward Karimnagar district in the Telangana region of the state has the least percentage (17 per cent) of sickness among the SSIs. Of the 3,352 SSIs set up in Karimnagar, 583 units have been closed down so far.

If we compare the Reserve Bank of India's data for 1999 to 2002 with the latest figures, the sickness among the SSIs in the state is growing.

As per the RBI, there were 11,480 sick SSIs in Andhra Pradesh in 1999, 13,510 sick units in 2000, 11,724 units in 2001 and 6,589 sick units in 2002.

As against this, we have over 38,500 sick units today. With the growing number of SSIs in the state, the number of sick units is also increasing.

As per the study conducted by the Federation of Andhra Pradesh Small Industries Associations and AP SSI Centre, in collaboration with Sandilya Consultants Private Ltd, the causes of sickness are technological obsolescence, inadequate marketing efforts and facilities, lack of infrastructure, paucity of working capital, managerial inadequacies and delay in settlement of receivables.

The main focus of the study was the implementation of the AP Small Scale Industry Revival Scheme. The scheme came into effect from June 25, 2001.

It is targeted at SSIs with over Rs 5 lakh investments in plant and machinery but turned sick. The study reveals that, despite the well-meaning efforts of the state government, the rehabilitation scheme did not draw any positive response either from the financing institutions or from the Sales Tax and other government departments.

"No financing institution has sponsored even a single unit. In fact, our discussions with the financing institutions revealed that the banks branches are not aware of the existence of the scheme," the study report, submitted last year, pointed out.

The study also examines the causes of incipient (beginning) sickness in SSIs.  It points out that there are instances where enterprises are born sick due to poor planning, delays in appraisal, sanction of limits from the financing institutions and lack of understanding of emerging markets on the part of the government supporting agencies and financing institutions.

Analysis of the case studies of firms that have become sick reveals that most of the units faced problems with financing institutions. For a few units, sickness was due to market conditions, management problems and problem with government agencies. Delayed payment was the main cause of sickness in the case of one unit.

Ch Prashanth Reddy in Hyderabad