Lack of demand top reason for sickness

According to the SIDBI Report on Micro, Small and Medium Enterprises Sector, 2010, the eight most important reasons for sickness in the sector are, in descending order of importance: lack of demand (reported by 71.6 per cent of sick units), shortage of working capital (48 per cent), marketing problems (44.5 per cent), power shortage (21.4 per cent), non-availability of raw material (15.1 per cent), equipment problems (10.6 per cent), labour problems (7.4 per cent) and management problems (5.5 per cent).

This was a finding of the Fourth Census of MSME (2006-07) and is quoted in the report.

Data compiled by the Reserve Bank of India from scheduled commercial banks on the status of sick small-scale units, potentially viable units and units under rehabilitation programmes show that the number of sick units as on March 2007, was 114,000 sick units. Of these, only 4,287 units were identified as potentially viable by banks (i.e. 3.7 per cent of the total sick units). Of these, only 588 units were put under rehabilitation programmes by banks.

The amount outstanding with banks, however, increased from Rs 1,608 crore in 2000 to Rs 13,849 crore in 2008. As against NPAs of 11.4 per cent in respect of all sectors of the economy, they were as high as 17.2 per cent in the case of small units in the year 2000-01.