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Special problems of SSI

Financial Problems Marketing Problems HR Related Problems

Major Problems are


As per Third all India Census for SSI 2001-2002, 71.6 % SSI has gone sick due to Lack of Demand 48 % 44.5 % 15.1 % 7.4 % 5.5 % sick due to Shortage of Working Capital sick due to Marketing Problems due to Non-availability of Raw Material sick due to Labour Problems sick due to Management Problems

Major Problems Today


dumping of goods in the market by way of under priced imports has become a serious problem in select sectors like -sanitary ware and ceramic
tiles, chemicals, pharmaceutical formulations, steel, non-ferrous metals, food products, toys, utensils etc ( PHD chamber of commerce)

the utmost problem SMEs are facing is lack of marketing skills -due to the lack of non-availability of raw materials and
difficulty in accessing sufficient working capital ( NSIC )

Major Problems faced by entrepreneurs in


these cities are -

Financial Problems
1. Low profitability 2. Delayed Payment 3. Inefficient finance management / recovery of receivables /poor liquidity 4. Scarcity of capital 5. Limited access to Bank finance 6. Absence of collateral security 7. Lack of information about various sources of finance 8. Bad Credit Rating 9. Unaware of Various policy support & incentives 10. Margin money / seed capital 11. Working capital requirement 12. Limited access to venture capital 13. Limited access to share market 14. Limited exposure to factoring & bill discounting 15. Unhealthy credit terms 16. Seasonality of raw material & high inventory cost 17. Ineligibility of products for bank finance

1.Low profitability
Price war from large players Dumping & low price imports Low quality production High cost of raw material High cost of capital Economies of scale High cost on transportation

Bargaining power of middlemen

2. Delayed Payment
Delayed Payments Act, 1993

3. Inefficient finance management / recovery of receivables /poor liquidity

4. Scarcity of capital 5. Limited access to Bank finance 6. Absence of collateral security


Audited balance sheet Margin Money 25% Rate as per credit rating of borrower
Exclusive charge on the assets of the enterprise.
Personal Guarantees of all promoter Directors. Charge on the unencumbered personal properties of the partners, promoter Directors, wherever applicable. Third party guarantee in case of credit line above Rs. 25.00 Lakhs. Any other collateral for the credit line above Rs. 25. 00 Lakhs to maintain asset coverage ratio above 1.25.

For Short term loan (180 days )


Satisfactory credit rating for the last three years Latest Balance Sheet etc. should be available. Satisfactory financial performance in terms of sales / turnover and profits. Satisfactory dealings with the Bank for at least five years. First charge / Equitable mortgage of fixed assets of the company / firm or extension of existing first charge / equitable mortgage of fixed assets, ensuring that there is a minimum asset cover of 1.50. Extension of Charge on current assets for the additional facility ensuring that adequate drawing power is available. Extension of all existing guarantees of Directors / Third party guarantees to cover the additional facility.

7. Lack of information about various sources of finance 8. Unaware of Various policy support & incentives 9. Bad Credit Rating
SME Rating Agency of India Limited

10. Margin money / seed capital 11. Working capital requirement 12. Limited access to venture capital 13. Limited access to share market 14. Limited exposure to factoring & bill discounting 15. Unhealthy credit terms 16. Seasonality of raw material & high inventory cost 17. Ineligibility of products for bank finance

MARKETING problems
1. Lack of professional approach in doing business 2. Lack Professional Marketing Skills 3. Language Barrier & communication skills 4. Lack of market Information 5. Lack of specific market segmentation 6. Lack of awareness of consumers preferences 7. Incompatibility of products with market need 8. Unmatched customer demand

9) No market survey & After sales services 10) Lack of proper networking & distribution channel 11) Imbalance between production & marketing /Over stock or Stock-out situation 12) Inefficient Supply chain management due to large number of intermediaries 13) Location disadvantage & limited access to market 14) Lack of Branding 15) Lack of design & Innovation 16) Low Quality Products 17) Packaging 18) Standardization & certification 19) Patents & Trade Mark 20) Advertising ,

21.Limited Access to Electronic & Print Media 22.Limited Access to Trade Fares & Exhibition 23.Limited access IT & E-commerce 24.Inadequate supply of Raw material & High cost of production 25.Pricing decision / Pricing pressure 26.Barraging power of Market intermediaries 27.High Cost of Production / Low Economies of Scale / Low Productivity 28.Stiff competition from large players 29.Globalization / Liberalization & Free Trade 30.Stiff competition from developing countries like china Japan 31.Limited Access to International Market 32.Lack of awareness about various growth strategies/ back ward & forward linkages // Ancilerization & Outsourcing 33.Smuggling & Under invoicing 34.Unawareness of social compliance & environmental laws

HR related problems
1) 2) 3) 4) Illiteracy , Incapable or inefficient management Shortage of skilled manpower & modern technology Improper manpower planning Absence of vision & adaptability to changing environment Difficulty in attracting & hiring good talent Retaining Good Talent Unwillingness to invest in Human Resource Development Lack of proper training & development

5) 6) 7)
8)

9) International Labour Laws & other regulatory burden 10)Lack of technical knowledge 11)Low entrepreneurial skills 12)Low investment in Research & development 13)Reluctant to learn new skills 14)Copy of product design /process & unawareness of intellectual property rights 15)Stringent Labour Laws & administrative policies

Laws applicable to Ssi


Industrial Development Regulation Act Labour related Laws
1) Apprentices Act, 1961 2) The Bidi and Cigar Workers (Conditions of Employment) Act, 1966 3) Bonded Labour System (Abolition) Act, 1976 4) Child Labour (Prohibition & Regulation) Act, 1986 5) The Children (Pledging of Labour) Act, 1933 6) The Contract Labour (Regulation & Abolition) Act, 1970 7) Delayed Payment Act 8) The Employees Provident Funds and Misc. Provisions Act, 1952 9) Employees State Insurance Act, 1948 10) Employers Liability Act, 1938 11) Employment Exchange (Compulsory Notification of Vacancies) Act, 1959 12) Equal Remuneration Act, 1976 13) The Factories Act, 1948 14) The Industrial Disputes Act

15) The Industrial Employment (Standing Orders) Act,1946 16) The Inter-state Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 17) Labour Laws (Exemption from Furnishing Returns & Maintaining Registers by Certain Extablishments) Act, 1988 18) Maternity Benefit Act, 1961 19) The Minimum Wages Act, 1948 20) The Payment of Bonus Act, 1965 21) The Payment of Gratuity Act, 1972 22) The Payment of Wages Act, 1936 23) The Sales Promotion Employees (Conditions of Service) Act, 1976 24) The Shops and Establishments Act, 1953 25) The Trade Union Act, 1926 26) Workmens Compensation Act, 1923 27) The Weekly Holidays Act, 1942 28) The Industrial Establishment Act 29) Employees Stock Option Act 30) Employees' State Insurance (General) Regulation 31) The Plantations Labour Act, 1951 32) Environment Protection Act, 1998

Enviornment related Laws


1. The Air (Prevention and Control of Pollution) Act, 1981 2. The Air and Water Pollution Act 3. The Environment (Protection) Act, 1986 4. The Water (Prevention and Control of Pollution) Act, 1974

Tax related Laws


1. 2. 3. 4. Income Tax Act Central Excise and Salt Act, 1944 Central Sales Tax Act/State Sales Tax Act Professional Tax

Local & Other Municipal Laws


1. 2. 3. 4. Town Areas Act Urban Land Development Act Municipality Act/Municipal Corporation Act Notified Areas Land Regulation and Land Use Act

Product & Process


1. Bureau of Indian Standards Act, 1986 2. Drugs and Cosmetics Act, 1940 3. Essential Commodities Act, 1954 4. Packaged Commodities Regulation Order, 1975 5. Pharmacy Act, 1948 6. Standards of Weight & Measures Act, 1976 7. Trade & Merchantile Marks Act, 1958 8. The Insecticides Act, 1968 9. The Prevention of Food Adulteration Act, 1954 10.Indian Bodies Act, 1923 11.Indian Explosive Act, 1884