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DISTRICT SICK UNIT DECLARATION COMMITTEE There are so many reasons for a small industry to become sick. Mostly it was due to mismanagement or ineffective financial portfolio. If the unit could not be received from its sickness, it can be declared a sick unit. For this purpose, State Government has formed a District Sick Unit Declaration Committee to declare the unit as sick, after studying various aspects in the financial position of the unit.
On the basis of the report of Nayak committee and the views of the Small Scale Industries Association and experts in the field. Government direct that the following parameters be adopted (by the District Level Committee) for evaluating the small Scale Industries and to declare them as sick. - When delay is noticed in payment of two consecutive quarterly interest dues if
interest if payable in quarterly terms or two consecutive half yearly terms as the
case may be.
- When a newly launched enterprise incurs cash loss during the very first
year/business cycle of its operation.
- When the turn over drops 25 % for two consecutive years compared with that of
the respective previous years performance.
- When the aggregate of cash loss equals or exceeds the capital deployed.
- A unit, which has at the end of the financial year accumulated losses, equal to or
exceeding its entire net worth.
- The review of the unit should pertain to only in such cases of units of Small Scale
Industries in the State, which are registered as such and manufacture goods, which
are exclusively reserved for small-scale industries.
- In any year, if the capacity utilization is less than 50% of the total capacity, the
committee will take up the review of the unit.
- When in any year, the current ratio is less than one and the unit is unable to meet ‘
the commitment to the creditors or lenders and if this persists while reviewing
the next quarterly position of the production, the unit may be studied by the
committee.
- It is the duty of the banker to bring the details, based on the above criteria for
discussions by the Declaration Committee.
- Critical ratios relating to liquidity, turnover, stock carrying etc., need to be
periodically looked in, to ascertain the budding sickness of the small industry.
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