INDUSTRIAL SICKNESS

Introduction
Industrial sickness is defined all over the world as an industrial company (being a company
registered for not less than five years) which has, at the end of any financial year, accumulated
losses equal to, or exceeding, its entire net worth and has also suffered cash losses in such
financial year and the financial year immediately preceding such financial year.

A major symptom of sickness is a steady fall in debt-equity ratio and an imbalance in the financial
position of the unit. Simply put, a sick unit is one which is unable to support itself through the
operation of internal resources (that is, earnings plough-back). As a gen-eral rule, the sick units
continue to operate below the break-even point (at which total revenue = total cost) and are,
thus, forced to depend on exter-nal sources for funds of their long-term survival.

Industrial sickness creates various socio-eco-nomic problems. When an industrial unit falls sick
those who depend on it have to face an uncertain future. They fear loss of jobs. Even if they do
not lose jobs they do not get their wages and compen-sation in time and are, thus, forced to live in
ex-treme hardship.

Of course, sickness is not a special problem of Bangladesh. It is, undoubtedly, a global

phenomenon. Even in industrially advanced countries there are numerous cases of bankruptcy or
liquidation. These sick units are nursed back to health through merg-ers, amalgamations,
takeovers, purchase of assets, or outright nationalisation. When the-problem becomes really
alarming or unmanageable, the unit is permitted to die its natural death.

In a capital poor economy like ours, we can not afford to have a new unit of the same magnitude.
The assumption of the authority is not totally wrong, when we find many industrial units are still
continuing their production and operation.

The Government of Bangladesh tried to nurse many sick undertakings by taking over their
management through Industrial (Development and Regulation). Act 1951. In many cases these sick
industrial units could not be nursed back to health due to inadequate delegation of authority,
bureaucratic control, red tapism, inadequate financial assistance by the government.
Sick Industrial Companies Act, 1985

The Sick Industrial Companies Act, 1985 (SICA) was enacted to make special provisions for the
timely detection of sick (and potentially sick) companies owning industrial undertakings. The
Board for Industrial and Financial Reconstruction (BIFR) was formed under the SICA to determine
the sickness of such industrial companies and to prescribe measures either for the revival of
potentially viable units or the closure of unviable companies.

With effect from December 1, 2016, the SICA has been repealed by the Sick Industrial Companies
(Special Provisions) Repeal Act, 2003 .This has resulted in the dissolution of the BIFR and other
bodies formed under the SICA

In practice, the time taken by the BIFR and the appellate body under the SICA (AAIFR) in dealing
with cases of industrial sickness and revival was lengthy and often plagued with uncertainties.
Further, there were often separate matters pending under different statutes (such as SICA and the
Companies Act) before various fora with respect to the same company. This often caused
confusion and conflict regarding the jurisdictions of such bodies. It was therefore decided that
instead of various bodies looking into different matters, one body should be constituted to handle
all such matters and to dispose of all pending matters, allowing companies to approach a single
forum and address varying pending disputes.

Accordingly, the National Company Law Tribunal (NCLT) and the National Company Law Appellate
Tribunal (NCLAT) were constituted under Companies Act, 2013 (Companies Act). The NCLT has the
jurisdiction to hear matters with respect to, amongst others, the management of a company,
mergers and amalgamations and revival or rehabilitation of companies. The jurisdiction of the
NCLT has been further bolstered by the Insolvency and Bankruptcy Code, 2016 (Bankruptcy Code)
which, amongst other things, provides that corporate insolvency processes may be initiated
before the NCLT.

With the Bankruptcy Code coming into effect, all proceedings pending before the BIFR and AAIFR
stand abated. However, the entity whose reference has abated may initiate fresh proceedings
before the NCLT under the Bankruptcy Code (that of corporate insolvency resolution), within 180
days of the commencement of the Bankruptcy Code, i.e. December 1, 2016. Further, as per the
provisions of the Repeal Act, the repeal of SICA would not affect any orders sanctioning a scheme
under SICA, however, the same does not provide any clarity with respect to the manner in which
the administration of such schemes (that have not yet been implemented) may be carried out.
Types of Sickness

Here we can find types of sick companies based on the circumstances. They are as follows:

 Born Sick: Sickness is not always a post-implementation feature. Some of the industrial
projects are born sick from the very beginning because owing to ill-conceived projects, bad
planning and poor appraisal, wrong choice of location and product selection, inadequate
market surveys, false fixed investment decisions and one customer-one product type
situation etc. Mostly the units established by the government under social welfare scheme
come in this category.
 Become Sick: Some projects become sick due to internal causes. They are based on some
circumstances i.e., poor management, poor deliberate diversion of funds, wrong
recruitment and faulty management policies are responsible for the sickness.
 Made Sick: Sickness is the push upon because of external causes that beyond the control
of the management. They may be sudden changes in government policies, technological
changes and macro, social, political and economical problems. One more reason for made
sick is that entrepreneur’s inefficient management policy.

Stages of Sickness

An industrial unit may become sick at any time from the date of establishment. There are
various reasons for sickness at different stages.

(a) Sickness in the Project Formulation Stage : A project may be sick before sanction and
disbursement of loan and establishment as industrial unit. This may be due to faulty product
selection, wrong location, dependence on foreign collaboration, false investment decisions
and conflict among the entrepreneurs etc. Here, if the situation is beyond control, it is
justifiable to close the project because of low risk and cost involvement.

(b) Sickness in the Project Implementation Stage : A unit may become sick in the project
implementation stage before commencement of operations.This may be due to installation of
defective machinery, failure to bring promoter's contribution or the share of financial
institutions, complexity in obtaining capital etc. Some appropriate preventive measures are
required to save the unit from going to the next stage of sickness.
(c) Sickness is First Production Stage: A unit may be sick after the commencement of
commercial production but before starting of marketing operations. This may be due to
accident in factory, major defect in plant & machinery, defect in production planning,
inadequate working capital, liquidity crunch etc. At this stage management should pay
more attention and take corrective action.

(d) Sickness in Marketing Operation Stage : A unit may become sick just after starting
of marketing operations. This may be due to easy availability of similar goods in the
market, inefficiency in marketing strategy, shortage of raw materials, power failure etc. At
this stage management should remain aware of the overall situation and take suitable
corrective measures to prevent the unit from becoming real sick.

(e) Sickness in Fully Operations Stage: This is the final stage of sickness. After the
commencement of commercial operations and marketing, if corrective measures are not
taken the situation adversely affect the functional areas of the unit and ultimately it finally
becomes sick. This may be due to easy availability of similar goods at a cheaper price,
sudden change in the government policy, natural disaster, increase in the cost of raw-
material, power, labour etc., shortage of working capital, unfavourable labour laws and
adverse industrial relations, mis-management, frequent breakdown of plant & machinery,
change in demand of customers etc.

Symptoms of Sickness

Shortage of Liquid Funds

A liquidity crisis is a negative financial situation characterized by a lack of cash flow. For a single
business, a liquidity crisis occurs when the otherwise solvent business does not have the liquid
assets necessary to meet its short-term obligations, such as repaying its loans, paying its bills and
paying its employees. If the liquidity crisis is not solved, the company must declare bankruptcy. An
insolvent business can also have a liquidity crisis, but in this case, restoring cash flow will not
prevent the business's ultimate bankruptcy.
For the economy as a whole, a liquidity crisis means that the two main sources of liquidity in the
economy – banks and the commercial paper market – severely reduce the number of loans they
make or stop making loans altogether. Because so many companies rely on these loans to meet
their short-term obligations, this lack of lending has a ripple effect throughout the economy,
causing liquidity crises at a plethora of individual companies, which in turn affects individuals.
Decreasing In Rate of Return

Decrease in rate of return is the decrease in the marginal (incremental) output of a production
process as the amount of a single factor of production is incrementally increased, while the
amounts of all other factors of production stay constant.

The law of diminishing returns states that in all productive processes, adding more of one factor of
production, while holding all others constant, will at some point yield lower incremental per-unit
returns.The law of diminishing returns does not imply that adding more of a factor will decrease
the total production, a condition known as negative returns, though in fact this is common.

A common example is adding more people to a job, such as the assembly of a car on a factory
floor. At some point, adding more workers causes problems such as workers getting in each
other's way or frequently finding themselves waiting for access to a part. In all of these processes,
producing one more unit of output per unit of time will eventually require increasingly more usage
of the input, due to the input being used less effectively.

Underutilization of Capacity:

Underutilisation is the extent to which an enterprise or a nation uses its installed productive
capacity. It is the relationship between output that is produced with the installed equipment, and
the potential output which could be produced with it, if capacity was fully used. However, as
output increases and well before the absolute physical limit of production is reached, most firms
might well experience an increase in the average cost of production—even if there is no change in
the level of plant & equipment used. For example, higher average costs can arise because of the
need to operate extra shifts, to undertake additional plant maintenance, and so on.

Underutilization rate is therefore, to measure the ratio of actual output to the level of output
beyond which the average cost of production begins to rise. In this case, surveyed firms are asked
by how much it would be practicable for them to raise production from existing plant and
equipment, without raising unit costs .Typically, this measure will yield a rate around 10
percentage points higher than the engineering measure, but time series show the same
movement over time.

Accumulation Of Excessive Inventories

An inventory accumulation is an excess of inventory that a business owner has difficulty moving
after an unplanned event adversely affects sales. For example, a sudden slowdown in the
economy results in fewer customers, or road construction or a new competitor redirects foot
traffic away from your business. Additionally, anticipated “hot” items might accumulate if
consumer interest switches to a similar product or the market becomes saturated with lower
priced knock offs.

If attempting to sell excess inventory doesn’t work, other methods exist to use it to the benefit of
your business. For example, you might give excess items to trade show and event participants who
visit your booth, sign up for your newsletter or make an order to attract them to become
customers or buy additional products. You also might give the items to existing customers who
send new customers your way. Additionally, you might donate accumulated inventory to non-
profit and charitable organizations, churches and schools to build your community reputation and
recoup some financial losses through tax breaks.

Process Of Industrial Sickness:

The process of industrial sickness is shown in the following table by different stages; normal tends
to sickness, incipient sickness and ultimate sickness:

Normal units Functional areas are normal and efficient. Profit generation. Current ratio>1
Tending towards Initial aberration. Decline in profit last year. Loss anticipation current year.
sickness
Incipient sickness Deterioration in functions; loss incurred; anticipated current year;
deterioration anticipated, CR>1
Sickness Deterioration debt-equity ratio current year, functions inefficient; cash
losses last year also in current year; CR<1 worsening debt-equity

According to Srivastiva and Yadav (1986), the stages can be shown as the following table

Cash profit Net working capital Net wroth

Healthy Unit + + +
Tending towards Sickness - + +
Incipient of Sickness 02 or more -
Sick All

Thus the stages of sickness follow distinct stages. The management should diagnose the firm
properly and take necessary steps to keep the units healthy at proper time.
Causes of Sickness

Internal Causes

Entrepreneurial Incompetence: Many entrepreneurs are setting up business units with limited
knowledge regarding production, accounting and marketing etc. This is not enough to survive in
the competitive world. The entrepreneur requires vast knowledge on strategic functional areas of
the business. Lack of complete knowledge on business leads to increase in cost of the business.

Financial Problems: Many companies face acute financial problems from the initial state of
planning and construction of the business. The investment base of many small scale units is very
weak and a slight disturbance in the market put them under acute financial strain. Often small
scale units borrow from banks and financial institutions but they are unable to meet the
repayment schedules. The burden of unpaid debt accumulates and they turn sick. In some cases
lack of support from banks causes a failure of small scale units as the banks insist on proven
performance either to restore working capital limits or to enhance existing limits.

Management Problems: The most important internal cause of sickness is management problems.
Wrong managerial decisions in the fields of production, marketing, finance, personnel
management etc. can spoil the business. Inadequate attention towards the maintenance
management leading to frequent breakdown and consequent lower capacity utilization,
insufficient sales promotion activities, inefficient management of working capital includes cash,
receivables, inventory and improper wage, increment and bad industrial relation make the
companies become sick.

Gestation Period: Often the gestation period becomes for too long than anticipated especially in
the case of large scale industrial unit. This might be due to delay in supply of capital expenditure
goods to be imported. Such delays cause cost escalations, leading to capital shortages, liquidity
problems, hike in production costs, and rise in prices and hence smaller than anticipated demand
for the product of the industrial unit. It adversely affects its profits.
Demand Forecasting: The company production schedule is completely based on demand
forecasting. Sudden appearance of competing substitutes in the market, radical and sudden
change in the tastes of people as production of a commodity is being taken down may all cause
industrial sickness.

Defective Plant & Machinery: Many entrepreneurs in the small scale sector do not seek
professional and technical guidance from competent authorities in choosing correct machinery. If
the plant and machinery finally selected and installed by them turns out to be defective, their
units are bound to suffer losses and will in all probability, turn sick.

Labour Problems: In some cases acute labour problem have resulted in strikes, lock outs and even
closure of industrial units. These problems may originate from differences with management over
the issue of wages, bonus, suspensions and retrenchment, inter-union rivalry etc. if not tackled in
time satisfactorily such problems can causes sickness.

External Causes

Demand and Credit Restrains: At times, recession in the market causes a steep decline in the
demand resulting in unsold stocks and losses to individual units. Products with towering prices for
example tractors, trucks, busses, cars etc. depends for their sustained demand on easy availability
of credit to buyers. If credit restraints are imposed so that the buyers are not able to arrange
finance, the demand for these products is bound to suffer. This is likely to leave the manufacturers
with unsold stocks inflicting losses on them. If this situation perseveres for quite sometimes, the
producing units are prone to turn sick. This problem can emerge in a serious way for auxiliary
units. If the demand of the principal buyer of the output of ancillary units falls due to any reason
whatsoever, these units are put in unstable position, they are bound to turn sick and may even
face closure.

Erratic Supply of Inputs: Some units depend on scare raw material whose supply is irregular. This
results in disturbing the production schedule causing losses to the unit. This often happens in the
case of units depending upon the supply of imported inputs. Insufficient availability of transport
facilities can also upset the supply schedule of inputs.

Power Cuts: A large number of industrial units face power cuts from time to time. These power
cuts are imposed by the state government as the generation of power is considerably below its
actual requirements. Drought situation during some years in a number of states further annoyed
the problem and acute power shortage resulted in frequent power cuts.

Government Policy: Sudden changes in the government policy relating to imports, exports,
industrial licensing, and taxation etc. can make viable units sick overnight. For instance, liberal
import policy for a particular product can inflict severe damage on the domestic units producing
similar products. The very existence of these domestic units is likely to be threatened particularly
if the imported product is cheaper and is of a better quality as compared to their products.
Production Constraints: This is another reason for the sickness which comes under external cause
of sickness. This arises due to shortage of raw material, shortage of power, fuel and high prices,
import-export restrictions.

The other causes are:

(ii) Differences among various persons associated with the pro-motion and management of the
enterprise

(iii) Mechanical defects and breakdown

(iv) Inability to purchase raw materials at an economic price and at the right time

(v) Failure to make controls effective in time, in case of deficiencies in work-ings

(vi) Deteriorating labour-management rela-tions and the consequent fall in capacity utilisation

(vii) Faulty financial planning and lack of balance in the financial (capital) structure.

It is often observed that many projects are started without proper feasibility study. Hardly any
long-term view of the future is taken. Instead, a project is sought to be managed on the basis of
myopic vision, inadequate analysis and improper approach. Often industrial projects are started
on an ad hoc basis without gathering much informa-tion about the expertise and competence
needed for the purpose.

Moreover, once the construction work is started on the basis of a project report, there is no
periodic assessment of the economic viability of the project. Often major changes in the political
and economic environ-ment (such as change in the party in power or change in Government)
make the basic assump-tions underlying the project unrealistic or inap-propriate. Yet the project is
made to remain opera-tional without considering the after-effects.

So, there are various reasons that make in-dustries sick. The prime among this is market-related.
Market obsolescence is one of the prime reasons for units turning sick. A striking example is that
of the jute industry, where the non-avail- ability of raw materials and constant power short-ages
have made many units sick. And bankers are not normally very responsive in helping a com-pany
that has gone sick.
Born of Industrial Sickness:

Sickness is not happened overnight- it is the matter of numbers of years. Different signs and
signals of sickness are available along these years. The important signals are:

a. Capacity utilization declines.

b. The short term obligations cannot be meet for shortage of liquid fund.
c. Inventories become excessive for declining sales.
d. Non submission of data to bank and other financial institutions
e. Irregularity in bank account
f. Frequent breakdowns in plants and equipments and ultimate disruption in production
g. The quality of product and services is declined.
h. Inability to pay the statutory reserve like the interest of loan, utility bills, tax and other
charges.
i. Unavailability of necessary technology
j. Frequent turnover of workers and managers for lack of sufficient compensation and
working environment.

Persistence of such signals reflectsin plants’ performance, capacity utilization and financial reports
of any enterprise. The shortage of cash for longer period, deterioration of different financial ratios,
outstanding statutory dues etc are the symptoms of sickness. The sickness can also be identified
by morale degradation of employees and desperation of managers.
The financial reports are not reflective of sickness of units’ performance all the time because of
practicing window dressing and of availability of data generally after one year.The industrial
sickness happens in different stage of industry life cycle. At the planning and construction stage
the causes are selecting an uneconomic location, inefficient method of production, products that
are going to be obsolete etc. At the second stage the causes of sickness roots in mistakes in
recruitment, using poor inputs and so on. And at the third and final stage the causes are declining
demand, more sophisticated production method initiated at the industry and arrival of new and
strong competitors in the industry etc.
Actually the root cause of sickness is management problems and the resultant cause is financial
problems. Some technical factors of sickness can be removed by using standard techniques by
qualified persons. Proper inventory management ensures better supply chain management. Lack
of that causes working capital blocked for longer period. The upstream and downstream supply
chain and different process create value of the product or services for ultimate customers. Supply
chain management reduces uncertainties in delivery of products. Total Quality management and
Quality Cycle ensure the quality of product and eliminate wastages. ISO certifications ensure the
consumers about the quality of product. No technology is appropriate for all the time. It is
necessary to modify the technology to make it up to date. Reengineering is the process to make
the technology up to date. Without necessary reengineering the firm have chance to be sick. By
using proper ergonomics, the firm must consider the health and hygienic issues of the workers
creating frequent turnover-that is one of the causes of industrial sickness. Motion, time study all
are important in performing efficiently and effectively. Too much capacity is agonizing as too little
capacity. It should be optimizing. Manpower should be adjusted to the work load. Hire and fire
policy of USA or diversifying the work of employees policy of Japan may be adopted to save the
firm from sickness. Proper scheduling and production planning is necessary to be effective. Master
production scheduling (MPS) and different techniques of optimization are to be adopted to ensure
the survival of the enterprise. Productivity and other factors of production should be under
continuous improvement to keep the firm healthy. Location, layout and material handing plan
ensure the cost of production and smooth flow of production.
The consequences of industrial sickness are very widespread. The entrepreneurs along with bank
and other financial institutions lose a huge amount of money invested at the project, lose of
employment opportunities due to closure of units, spreading unrest in the industry, wastage of
scarce resources like land, capital and natural resources create adverse effect to investors and
entrepreneurs and loss of expected revenue of governments etc.

Effects of Sickness

The phenomenon of industrial sickness not only tends to aggravate the problem of unemployment
but also renders infectious capital investment and generally creates an adverse climate for further
industrial growth. While in advances countries where there are adequate social security benefits,
this is accepted as a normal feature of industrial scene. But such sickness ahs much more serious
economic consequences in a country where unemployment is a major problem and financial
resources are scarce.

Some of the consequences of industrial sickness are discussed below:

(i) Losses to Banks and other Financial Institutions: Banks and other financial institutions lend
substantial funds to industrial units. When these units turn sick, they cause considerable losses to
the lending institutions which had granted loans to them. Further, the future lending capacity of
these institutions also get adversely affected because of the locked up funds in the sick industrial
units.
(ii) Unemployment: Another serious consequence of industrial sickness has been loss of
employment to workers associated with sick units. This aggravates the most serious socio-
economic problem of unemployment in a labour surplus economy like Bangladesh. It is most
dangerous socio economic problem of the nation. According to estimation, nearly 30 lakhs of
workers are likely to be effected by the closure of sick and weak unit in the country. In relative
terms, about 6% of total employment in industrial sector is likely to be affected by industrial
sickness. Out of total 30 lakh workers likely to be affected by closure of sick units, even more than
two-thirds (68%) of total will be rendered jobless in small sector alone. This presents a severe
prospect in the employment scenario of the country.

(iii) Industrial Unrest: A from rendering a number of workers unemployed, a sick unit may also
lead to initial unrest. The trade unions (of both sick and non-sick units) may resort to strikes
opposing retrenchment of labour of the closed units and as such disturb industrial peace in the
country. The closure of sick units causes not only unemployment, but leads to industrial unrest
also. Whenever the workers are retrenched and rendered out of jobs, the trade unions oppose it
and resort to industrial strikes. Such disturbances threaten the peace and harmony of the
industrial environment. This results in setback to industrial production.

(iv) Wastage of Resources: If a unit in which substantial investment has been made in plant and
machinery turns sick, it recourse in wastage of scarce resources. The closure of a unit thus not only
results in decline in production in the economy but also blocking of valuable savings and capital
investment which, otherwise, should have yielded profitable returns to the economy. In an under-
developed economy like ours, the resources are already scarce. If these scarce resources are
locked up in sick units, it becomes the wastage of scarce resources which otherwise invested
would have yielded substantial returns to the economy.

(v) Revenuer Loss to the Government: The Government gets substantial revenues from
industrial units by way of various levies. but when a number of units become sick, the receipts of
revenue are greatly reduced. The central, state and local government raises substantial revenue
from industrial units by way of various levies. Therefore sickness in industrial units results in loss
of revenue to the government.

(vi) Adverse Impact on Related Units: An industrial unit is normally linked with a number of
other industrial units though backward linkages and forward linkages. Therefore, sickness in one
unit is likely to adversely affect the other related units. For example, if a iron and steel unit gets
sick, it will affect the units that supply inputs to it and which take its output.
(vii) Adverse Impact on Prospective Entrepreneurs and Investors: The closure of a large number
of sick units generally affects the psychology of investors. They may feel demodulated to invest.
The whole industrial development of the economy.

Analysis And Findings:

The magnitude of industrial sickness can be understood by measuring the statistics of bankruptcy,
ratio of sick unit to total unit, number of sick units, the sign of sickness in industrially developed
site and also in industrially backward site, the growth of total small scaleindustries and sick SSI
both inadvanced and backward area. It is natural that inefficient units would be replaced by more
efficient units but the consequences of sickness affect the entrepreneurial spirit of a nation. To
study the intensity of sickness in remittance and natural resource rich and industrially backward
Sylhet division.From the data of 5268industrial units of BSCIC industrial estates, the researchers
found the division wise estates areas, total industrial units, active units and sick units’ ratio as
follows:

Table 1:Division wise sick units in Industrial Estates:

Percentage
Estate Total industrial
Divisions Area Population Area units Active Units Sick/Closed
Barishal 13297 8147000 185 192 0.58 0.20
Chittagong 33771 28079000 340 880 0.72 0.07
Dhaka 31120 46729000 714 2668 0.42 0.03
Khulna 22272 15563000 170 368 0.71 0.11
Rajshahi 34514 33994000 450 907 0.83 0.04
Sylhet 12596 9807000 98 253 0.64 0.10

From the table 1; it is found that the percentage of sick units to total industrial units in
Sylhet division is 10%, where the highest ratio is found in Barishal and Khulna division
(20% and 11%). Considering the estate area and total industrial units, Dhaka division is in
better position where the proportion of sick units is only 3.00%. Industrially advanced
Chittagong region has also a greater percentage of sick units i.e. 7% whereas industrially
not so advanced Rajshahi has lower sick units (only 4%). So, it can be concluded that more
entrepreneurial efforts give birth to more sick or closed units.
To get more insight to the density of sick units in Sylhet division, the district wise analysis
nears significance. The table blow shows the district wise intensity of sick units in Sylhet
division:
 Table 2:Districts wise sick unit in industrial estates of Sylhet Division

Indus Indus On Under Sick or

Estate
District Area Populatio Density -trial trial Produc Constr Closed
Area
n Plot Unit tion -uction
Hobigonj 2,636.58 2,059,000 780.94 15.00 70 59 35 17 2
Maulvi
Bazar 2,799.39 1,902,000 679.43 14.59 101 64 29 10 7
Sunamganj
3,669.58 2,443,000 665.74 25.52 116 21 7 7 0
Sylhet 3,490.40 3,404,000 975.25 25.76 255 150 130 6 13
12,595.9
Total 9,807,000 778.58 81 542 294 201 40 22
5

From the above table, the highest numbers (13) of sick units are found on two BSCIC industrial
estates of Sylhet division, the lowest in Sunamgonj (o). In Sunamgonj district the industrial
activities in industrial estates area is very insignificant (only seven active units) so the sickness is
zero here. Moulvibazar has 7 sick units out of 29 active units and Hoibigonj has two units out of
59 where active units are 35. It is also established in Sylhet division that more industrial activities
creates more sick units.

Industry Wise Sick Units:

It is also important to study the industry wise sickness in order to get more insights into the
problems of sick units. In the table3, the industry wise sickness in Sylhet division is shown:

Table 3: Industry wise sick units in Sylhet division

Sylhet Sick units

Number of Sick/Closed Number of Sick/Closed Unit
Active Units Unit Proportion SickUnits Proportion to Total
Chemical &
Pharmaceuticals 12 0.09 0 0.00
Cloth 14 0.11 6 0.46
Engineering 28 0.22 2 0.15
Food 64 0.49 4 0.31
Forest 1 0.01 0 0.00
Jute 0 0.00 0 0.00
Leather 1 0.01 1 0.08
Paper 5 0.04 0 0.00
Other 5 0.04 0 0.00
Total 130 1.00 13 1.00
The table shows maximum involvement of entrepreneurs in food processing industry that creates
31%(4) of total sick units (13). This is due to the stiff competition in the market and management
failure to cope with that competition. The highest number of sick units is created by cloth industry
because of non-availability of raw materials, labor, and repairing facilities of machinery locally.
Further the marketing of cloth is conducted by traders of Narayangonj and Dhaka. So then carrying
cost of raw materials and also of finished goods destroys the firm’s competitiveness and makes it
sick. Two engineering units are sick for managerial problems. One leather producing unit is sick
due to impractical planning in inception period and this region is not suitable for producing and
marketing leather goods for in availability of raw materials, skilled labor, and also traders.

Suggestion To Prevent Industrial Sickness

After analyzing the industry type, sickness, causes of sickness and stage of sickness held, the
corrective actions that can be recommended to prevent sickness andto provide the treatment of
sickness are as follows:

At Planning Stage:
Keeping the causes of sickness in the planning of any project makes the project born sick. So,
preventive measures can be taken to remove the causes of sickness in the project planning. The
preventive measures include scientific and systematic selection of project, proper evaluation and
implementation by taking the help of experts in every stage. Specifically the location selection,
layout and material handing plan should be given proper importance, In every stages of capital
budgeting the Chamber of Commerce and Industries may be involved for their more practical
outlook.

At The Operation Stages of Normal Units:

To prevent the‘make sickness’ of industrial units it is important to routine check up the operation
of units by various technical methods like implementing inventory and supply chain management,
implementing TQM and quality cycle in significant stages of production, reengineering when
necessary and routine checkup of financial reports and keep it at standard level.

For Units Tending to Be Sick:

Regular check up of the managerial practices and removing the deficiency in finance, marketing,
human relation, operation & infrastructure are important to prevent the sickness for the units that
tend to be sick.
For Units of Incipient Sick:
Identification and detection of sickness at the incipient stage of sickness are most important for
effective decision making. In order to do that, banks and other financial institutions should
periodically review the accounts of borrowers to arrest the sickness in incipient stage and
cooperate the entrepreneurs to provide effective treatment to remove sickness. It needs
integration of diverse viewpoints of management, financial institutions and labor union to come
on the unified decision to treat the sickness.

For Sick Units:

To make effective decision regarding the sick units there must be effective division in authorityto
treat those units. Not only financial measures can treat sick units, other measures must need to
rehabilitate those units. The actions of rehabilitation should be started with no delay. Above all in
industrial policy of Govt. there must be necessary conservative ways to keep the domestic
industrial units alive from liberalization of trade worldwide.The strategies to great sick units must
include the strategy to close some units, revive some and combine some with other industrial
units and other measures also.

Concessions By The Government Policy

A number of measures have been taken to tackle the problem of indus-trial sickness. The
importance of detection of sickness at the incipient stage has been emphasised by the RBI. The
policy framework in respect of measures to deal with the problem of industrial sick-ness has been
laid down in the guidelines for guidance of administrative ministries of the Central Government,
State Governments and financial institutions.

The salient features of these guidelines are the following:

(a) The administrative ministries in the Government will have specific responsibility for
pre-vention and remedial action in relation to sick-ness in industrial sector within their respective
charges. They will have a central role in monitoring sickness and coordinating action for revival
and rehabilitation of sick units. In suitable cases, they will also establish standing committees for
major industrial sectors where sickness is wide-spread;

(b) The financial institutions will strengthen the monitoring system so that it is possible to take
timely corrective action to prevent incipient sickness. They will obtain periodical returns from the
assisted units and from the Directors nominated by them on the Boards of such units. These will
be analysed by the Industrial Development Bank of India and results of such analyses conveyed to
the financial institutions concerned and the Government.
(c) The financial institutions and banks will initiate necessary corrective action for sick or incipient
sick unit based on a diagnostic study. In case of growing sickness, the financial institutions will also
consider taking of management responsibility where they are confident of restoring a unit to
health. The Ministry of Finance will have to issue suitable guidelines for management;

(d) Where the banks and financial institu-tions are unable to prevent sickness or ensure revival of
a sick unit, they will deal with their out-standing dues to the unit in accordance with the normal
banking procedures. However, before doing so, they will report the matter to the Govern-ment
which will decide whether the unit should be nationalised or whether any other alternative-
including workers’ participation in management can revive the undertaking.

(e) Where it is decided to nationalise the undertaking, its management may be taken over under
the provisions of the Industries for a period of six months to enable the Government to take
neces-sary steps for nationalisation.

Conclusion:

Industrial development of any country depends on the efforts of entrepreneurs. The

entrepreneurs are afraid of industrial sickness as it involves the loss of invested capital, career and
huge opportunity cost of intelligent entrepreneurs nowadays. The concern authority should come
forward with different measures to reduce the risks by removing the causes of sickness as much as
possible in industrial units. Along with cooperation of authorities, the proper training of
entrepreneurs and flow of necessary information is also important to prevent sickness. In a
planned and underdeveloped labour surplus economy like Bangladesh industrial sickness can have
serious consequences. The sick units may be attempted to be turned around through efficient
management, change in top level executing a turnover strategy.