Government
of Punjab
Department of Industries & Commerce
NOTIFICATION
Dated: 29th May, 2003
No. 5/58/2002/IIB/1510 : Whereas, with a view to facilitate the development
of Industry in the State, Government of Punjab have notified the “Industrial
Policy – 2003” vide No. 5/58/2002/IIB/968 dated 26.3.2003, which inter-alia
provides for grant of Relief and Concessions to Sick Small Scale Industrial
units.
Now, therefore, to implement the scheme of
Relief and Concessions set out in the aforesaid policy, the Governor of Punjab
is pleased to notify detailed scheme as under:-
I. PREAMBLE
Small Scale Industries
(SSI) constitutes an important and crucial segment of the industrial sector.
With opening up and globalization of economy there has been considerable pressure
on the performance of the SSIs, resulting in a number of them becoming sick.
Although industrial sickness is an inherent part of the process of development,
it causes unemployment, non-payment of state and central government dues,
blocking of institutional finance and non-utilization of productive assets.
Various factors responsible for causing sickness can be broadly categorized
into internal and external factors.
The internal factors include:
- Technical
causes such as obsolete technology and non-availability of skilled labour,
- Financial
causes such as poor resource management, diversion of funds and deficiency
of working capital and other funds, and,
- Managerial causes such
as lack of entrepreneurship, lack of professionalism and marketing problems.
The external factors include:
- Economic causes
such as high cost of inputs, uneconomic size of the project, over estimation
of demand and high break even point, and,
- Socio-political
causes such as Government controls and its fiscal policies such as taxation
and non-payment of subsidies and incentives in time, and, lack of physical
and social infrastructure.
Therefore, concerted efforts
are required to be initiated by the government and other concerned agencies
for timely detection of sickness at its incipient stage. To facilitate the
revival of viable sick industrial units, Government of India have set up a
statutory board viz. Board for Industrial and Financial Reconstruction (BIFR)
under the Sick Industrial Companies (Special Provisions) Act, 1985 (BIFR is
now being replaced by Tribunals). Small Scale Industries do not, however,
come under the purview of BIFR or said Tribunals. To help this sector, Reserve
Bank of India (RBI) has issued guidelines to the scheduled commercial banks
for rehabilitation of sick units. But the approach has not yielded the desired
results and Non-Performing Assets (NPAs) have piled up year after year.
State Government has thus
deemed expedient to set-up a State-Level Institutional mechanism, associating
concerned state government departments, institutions, banks and industry associations
to tackle this issue. The banks will be persuaded to voluntarily join this
scheme and will also provide for timely identification of potentially viable
sick units before it is too late for any revival.
This mechanism will assist
in formulating a revival package for such closed down units which can be economically
viable.
For this purpose a State-Level
Industrial Revival Forum comprising of such institutions and agencies will
be constituted which will consider concessions as provided in this scheme
for the rehabilitation of the unit.
II. TITLE
This Scheme shall be known as "Scheme for Revival of Small Scale Viable
Sick Industries."
III. OPERATIVE PERIOD
This Scheme shall come
into operation with effect from 1st April,
2003.
IV. APPLICABILITY
OF THE SCHEME
The Scheme shall be applicable
only to Small Scale industrial units/ancillary units in the manufacturing
/ services sector whose total investment in fixed assets (including land &
building) exceeds Rs. 25 lac.
V. ELIGIBILITY
Sick industrial units as defined in the RBI guidelines for rehabilitation
of sick units issued vide No: RPCD. NO. PLNFS.BC.57/06.04.01/2001-2002 dated
16
January 2002, and fulfilling the criteria at IV above will be eligible
under this scheme.
The scheme will not be applicable to the units becoming
sick on account of wilful default.
VI. DEFINITIONS
1. Sick Unit: An SSI unit
would be considered sick if
(a) Any of the borrowal accounts of the unit
remains substandard for more than six months
i.e. principal or interest, in respect of any of its borrowal accounts has
remained overdue for a period exceeding one year. The requirement of overdue
period exceeding one year will remain unchanged even if the present period
for classification of an account as sub-standard, is reduced in due course;
or
(b) there is erosion in the net worth due to
accumulated cash losses to the extent of
50 percent of its net worth during the previous accounting year; and
(c) The unit has been in commercial production
for at least two years.
2. Net Worth:
In case of a limited company net worth means the sum total of paid up capital
and free reserves. In case of a partnership/proprietary concern net worth
means the sum total of partners/proprietor's capital and free reserves.
3. Free Reserves: Means all reserves created
out of profit and share premium account but does not include reserves
created out of revaluation of assets, written back depreciation under amalgamation
provisions.
4. Bank: Means any public sector bank, District
Co-operative Bank, Urban Co-operative Bank and any other bank which is a scheduled
bank in terms of the second Schedule to the Reserve Bank of India Act.
5. Financial Institution: Means Industrial Development
Bank of India, Industrial Finance corporation of India, Industrial Credit
and Investment Corporation of India, Small Industries Development Bank of
India, Punjab State Industrial Development Corporation, Punjab Financial Corporation
or any other institution which is authorised under any law to advance term
loans to industrial units.
6. Viable Sick Unit: A unit may be regarded
as potentially viable if it would be in a position, after implementing a relief
package spread over a period not exceeding five years form the commencement
of the package from banks, financial institutions, Government (Central / State)
and other concerned agencies, as may be necessary, to continue to service
its repayment obligations as agreed upon including those forming part of the
package, without the help of the concessions after the aforesaid period.
7. Dues Payable: Means amounts outstanding in
respect of all statutory dues like Sales Tax, Central Excise, Electricity
Duty, Energy Charges, Income Tax, Provident Fund or dues of such other authorities
which have legal claims to receive payment from the unit.
8. State Government: Means Government of Punjab.
9. Special Cell: Means cell in the Industries
Department.
10. Forum for Industrial Revival: Means the Forum
appointed by the State Government for the implementation of this scheme.
11. Wilful Default: Means default as prescribed
by RBI vides Circular DBOD No. DL. (W) BC. 110/20.16.003/2001-02 dated: 30th May 2002 covering the following:
(a) Deliberate non-payment of the dues despite
adequate cash flow and good net worth.
(b) Siphoning off of funds to the detriment of
the defaulting unit.
(c) Assets financed have either not been purchased
or have been sold and proceeds have been misutilised.
(d) Misrepresentation / falsification of records.
(e) Disposal / removal of securities without
bank’s knowledge.
(f) Fraudulent transactions
by the borrower.
12. Eligible Assets: Means the assets created during
the period of two years from the date of sanction of the rehabilitation package
subject to limit of additional investment as approved by the Board for rehabilitation
of the sick unit. No assets acquired, created and / or paid for after this
period shall be considered eligible.
13. Eligible Fixed Capital Investment:
Means investment in:
a.
Land: The actual price paid for the land to the extent needed for the industrial unit excluding land
development charges but including land charges on expansion and modernisation
within the period of and as part of the project for rehabilitation.
b.
New Building: Means additional building constructed to accommodate additional machinery acquired for the purpose
of balancing, expansion and modernisation within the period of and as part
of the project for rehabilitation.
c.
Other Construction: Means other civil work required for installing plant and
machinery as a part of rehabilitation project or required for effluent treatment
plant.
d.
Plant and Machinery: Means new plant and machinery and imported second hand
machinery and installation expenditure capitalised for plant and machinery,
capital interest during construction cost not exceeding 5% of the total fixed
capital investment.
e.
Technical Know-how Fee: Technical know-how fees or drawing fees paid in lump
sum to as approved by Govt. of Punjab in accordance with the policy in force
from time to time or paid to laboratories recognised by the State Govt. or
Central Govt.
f.
Miscellaneous:
-
the amount spent on rationalisation
and other dues of workers.
-
Amount spent on plant for
pollution control measures including facility for collection and treatment of effluents and
hazardous wastes.
-
Amount spent on captive
power generating sets for the connected load including the connected load
for original plant.
-
Assets acquired under Hire
Purchase Scheme or Instalments System would be considered eligible, excluding
the cost of interest, subject to condition that the industrial unit gives
a specific legal undertaking that within the eligibility period the unit shall
not return the said assets to the organisation from whom it was acquired,
failing which the deferred amount
becomes refundable and recoverable with penal interest at 12% p.a. within
one month from the date of discontinuation of agreement under Hire Purchase
Scheme or Instalments System.
g. Ineligible items: Working capital (whether raised
through Bank or otherwise and including working capital margin), goodwill
fees, engineering fees, commissioning fees, commissioning expenses, royalties
(capitalised or otherwise), pre-operative expenses, expenditure on trucks,
cars, vans, trailers, tractors and transport vehicles and catalysts will not
be considered as eligible fixed investment for the purpose of this Scheme.
VII. RELIEFS
& CONCESSIONS
The State Government may extend following concessions:
1. Deferment of recovery arrears
of sales tax, purchase tax, electricity duty, power bills, house tax and water
charges for a period upto five years. These funded dues be made repayable
within a period of five years thereafter with interest at a specified rate.
2. Deferment of payment of
electricity duty by the unit in respect of energy consumed, for a period of
2 years from the date of sanction of rehabilitation package. This relief/concession
may be extended for two years after a review by the board. The amount so deferred
will be recovered in six to ten half yearly instalments
beginning from the financial year subsequent to the year in which the relevant
two-year period expires. The deferred amount will carry interest as specified.
3. Exemption from power cuts
to such units will be ensured. In case this is not possible in view of reduced
power availability and other compelling demands, the board will reduce power
cuts applicable to sick units to about 50% of the stipulated power cuts in
case of other industrial units.
4. Prompt permission of the State Government
to the sick units for the sale of surplus land.
5. Minimum charges for electricity connection
would be exempted during the closure period.
6. Banks / financial institutions will grant
reliefs and concessions to the potentially viable sick units as prescribed
in appendix-II of RBI guidelines for rehabilitation of sick small-scale Industrial
units issued vide Circular RPCD. NO. PLNFS.BC.57/06.04.01/2001-2002 dated:
16 January 2002.
7. In addition to reliefs/concessions envisaged
in para-6 above, the benefit of one time settlement of outstanding dues can
be considered, as envisaged in para-5 of the RBI guidelines.
While submitting proposal for Revival, the concessions
sought from State Government / Banks / Financial Institutions should be fully
quantified.
VIII. PROMOTER’S CONTRIBUTION
It is imperative that while
rehabilitating a company / unit all concerned have to sacrifice. Accordingly,
Promoter will contribute at least 20% of the cost of scheme as equity in a
stipulated time frame.
IX. FORUM
FOR REVIVAL OF SICK UNITS
State Level Forum for Industrial Revival shall comprise of following members:-
|
(i) |
Principal Secretary Industries & Commerce
|
Chairman |
|
(ii) |
Financial Commissioner, Taxation |
Member |
|
(iii) |
Principal Secretary, Power |
Member |
|
(iv) |
Chairman, PSEB |
Member |
|
(v) |
Secretary, Local Government |
Member |
|
(vi) |
Managing Director, PSIDC |
Member |
|
(vii) |
Managing Director, PFC |
Member |
|
(viii) |
Representative of concerned Banks |
Member |
|
(ix) |
Regional Head, RBI |
Member |
|
(x) |
Director, Industries
& Commerce |
Member Secretary |
The Forum will meet once in a month or earlier,
if required.
X. PROCEDURE
1.
Application for Registration
(a) Financial institutions or banks desirous
of reviving a sick unit financed by them may apply to the Special Cell
in the Industries Department in the Form S(a) for availing of reliefs
and concessions.
(b) Any viable sick non-BIFR/SSI
unit can also approach the Special Cell directly by applying in Form S(b).
(c) Such applications should be accompanied by
a proposed Revival Scheme giving the causes of sickness, Revival measures
as per guidelines of Forum and promoters contribution and also audited Balance
Sheets for last three years.
2.
Preliminary Scrutiny
The
Special cell will carry out a preliminary scrutiny mainly on the following
aspects:
(a) Is
the applicant unit eligible for grant of reliefs under this Scheme in terms
of Clause-V herein?
(b) Is
the applicant unit actually sick as defined in Clause-VI.1 herein?
(c) Is
the application accompanied by a proposed Revival scheme?
(d) Is
the application accompanied by the unit's audited accounts for preceding three
years?
(e) Are
the auditor's remarks dealt and complied with fully and satisfactorily?
If the answers to the above
questions are in the affirmative, the Special cell will register the application
and give a registration number, which will be conveyed to the applicant in
Format S(c). Such a scrutiny shall be complied within a period of maximum
of 10 working days.
3. Reference
to Consultants
The scheme shall then the
referred by the Forum to an independent consultant from a panel of consultants
approved by the Forum or given in the Directory of Industrial Consultants
published by I.D.B.I. to:
a) Indicate whether
there has been mismanagement or willful siphoning off funds.
b) Study if the unit in question
is a 'viable sick unit' as defined in Clause-VI.1,and,
c) If yes, prepare a draft
revival scheme for the unit under the broad parameters of the scheme.
The package will incorporate the reliefs and concessions to be granted by
the various agencies and sacrifices to be borne by each of them, which
will also be quantified. The consultant will complete the study within fifteen
days and submit its report to the Special Cell. The cost of the study will
be borne by the applicant.
4. Circulation
amongst the Members of Forum
The Special Cell would
examine the draft scheme of the consultant and place before the Forum. The
Forum may give ‘in principle’ approval of the scheme as it is, or modify it,
or refer it back to the consultant for fresh appraisal, or reject it.
5. Sanctions
by the Concerned Agencies
After the ‘in principle’
approval of the Forum, the scheme will be referred to the concerned agencies,
who shall grant their consent for the reliefs and concessions / sacrifices
as envisaged, within a period of 30 days. In case they are not in a position
to grant their consent within this time period, they will advise the Forum
in writing accordingly, giving cogent reasons for non-grant of the reliefs
and concessions as envisaged with in the given time, failing which it would
be considered as a deemed consent and the case will be considered accordingly
by the Forum. In case the financing bank and / or financial institution are
not agreeable to sanction rehabilitation assistance to the unit, they shall
have to state cogent reasons for the consideration of the Forum.
Upon receipt of comments
of the concerned agencies / banks, the scheme shall again be placed before
the Forum. If the Forum is of the opinion that the final scheme as amended
by the concerned agencies, or in respect of Government Departments as determined
by the Forum, is a viable scheme, it shall sanction the scheme, and issue
orders accordingly.
Decisions of Forum would
be binding on all the Departments of the State Government.
6. Time frame
for issuance of orders
The respective Departments
of the State Government or its agencies participating in the revival programme
of sick unit shall sanction the reliefs as decided by the Forum under the
provisions of the respective Act/Rules, policy or provisions. They shall issue
final orders sanctioning reliefs/concessions to the unit within one week of
the receipt of the minutes of the meeting of the Forum wherein the decision
to grant relief & concession to the concerned sick unit has been taken,
failing which these shall be deemed to have been given. Similarly banks /
financial institutions shall also sanction the reliefs envisaged in the scheme
within 10 days of the receipt of orders of the Forum.
XI. TERMS AND CONDITIONS FOR GRANT OF RELIEFS
1. Forum will carry out periodical reviews,
apart from annual review of the performance of the unit under revival.
During the period of revival the unit shall arrange for auditing of its accounts
by a firm of chartered accountants as approved by the Forum.
2. The unit which avails of reliefs under this
Scheme shall neither declare dividend or nor pay interest on the deposits
put up by the promoters during the currency of the revival package.
3. The industrial unit availing of the incentives
under this Scheme shall install and effectively operate and maintain pollution
control measures as per standards prescribed and approved by competent authority
in this regard.
4. The industrial unit shall have to remain
in production continuously, at least, till the expiry of the revival period
granted by the Forum.
5. The industrial unit shall furnish details regarding production,
employment or any other information, which the State Government and Forum
may require from time to time.
S.C. Agrawal
Principal
Secretary to Government, Punjab
Department
of Industries & Commerce
