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New Industrial Policy 2001-2006
PROCEEDINGS OF THE GOVERNMENT OF KARNATAKA
Sub: Package of reliefs for revival/rehabilitation of sick industries
Read: 1.G.O.No. CI 12 PUM 93 dated 26th Dec. 1996.
2.G.O.No. CI 26 BIFR 95 dated 19th Nov. 1997.
Preamble

In Govt. Orders read at 1 & 2 above, certain reliefs were extended for revival of sick SSI units and also sick industries registered with the BIFR. In view of the changing economic scenario, in particular the impact of globalisation and liberalization on the local industry and also the likely impact of various agreements under the WTO regime, a need has been felt to modify the package of reliefs for revival/rehabilitation of sick industries.

The matter has been discussed in detail with all concerned Departments. The relief package in respect of arrears of energy bills has been considered by the Karnataka Electricity Regulatory Commission and the Commission has approved the same in the Tariff Order 2002.

Hence the following orders:

ORDER NO. CI 167 SPI 2001, BANGALORE, DATED 25TH SEPT, 2002

In supersession of the orders read at 1 & 2 above the following modified orders are issued regarding package of reliefs for revival of sick industries:

  1. NON BIFR CASES - SICK SMALL SCALE INDUSTRIES [NOT COVERED BY SICA]:

    A. Definition of a sick unit [As per RBI guidelines RPCD No. PLNFS.BC.57/06.04.01/2001-2002 dated 16th Jan.2002]:
      An industry is considered as 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 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% of its net worth during the previous accounting year;
     
    and
    c) The unit has been in commercial production for at least 2 years. Units becoming sick on account of willful mismanagement. Willful default. Unauthorized diversion of funds, disputes among partners, promoters, etc., will not be considered for rehabilitation. [The definition of the sick unit will stand amended as and when revised by the Reserve Bank of India/Govt].

B. Margin money Assistance for SSIs
a) This would be on the lines of the National Equity Fund (NEF) scheme of the Small Industries Development Bank of India (SIDBI);
b) Sick units only in the SSI sector, which are considered potentially viable would be eligible for Margin Money assistance;
c) The project cost on rehabilitation should not exceed Rs. 40.00 Lakhs. The promoter's contribution should be 10% of the project cost and the maximum amount of assistance from the State Govt. would be Rs.2.50 lakhs per project;
d) The conditions regarding security and repayment would be those applicable under the NEF scheme;
e) Margin money assistance in any year would be limited to the budgetary provision; and
f) The Margin Money scheme would be utilized after availing full benefits under the NEF for eligible units.
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                                        C. Reliefs from KPTCL/Regional Power Supply Companies:

  • KPTCL/Regional Power Supply Companies may be instructed not to charge fixed charges/demand charges during closure period;
  • Arrears of energy bills of KPTCL/Regional Power Supply Companies may be allowed to be repaid in 6 half-yearly installments with interest calculated at 6% per annum or [½% per month]; Arrears for this purpose will be arrears as indicated in the rehabilitation package or the Order sanctioning the relief package to the unit by the Commissioner for Industrial Development and Director of Industries & Commerce as detailed in sub Para (G) 2.
  • KPTCL/Regional Power Supply Companies may not charge interest for the closure period.

Note:
KERC in its Tariff Order 2002 has ordered that "However considering request of the industries, the Commission has agreed to earmark an amount of Rs.1.0 Cr. Out of the cross subsidy available from the industrial tariff and accords approval for implementation of the reliefs to the sick industries under New Industrial Policy by KPTCL". The amounts of reliefs and concessions extended by KPTCL/Regional Power Supply Companies, in excess of Rs. 1.0.Cr., will be reimbursed by the industries Dept. through budgetary releases, for which purpose KPTCL/Regional Power Supply Companies will first extend these reliefs to the concerned industrial units on the basis of the order sanctioning

The relief package issued by Commissioner for Industrial Development and Director of Industries & Commerce and thereafter submit a consolidated claim on annual basis to the Industries Dept for reimbursement.
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Rephasement of KIADB, KSSIDC, KEONICS Dues

The overdues of the entrepreneurs, payable to KIADB, KSSIDC, KEONICS as indicated in the relief package may be rephrased and the entrepreneurs may be allowed to make payment of overdues free of interest on these amounts in 4 equal annual installments with a moratorium period of 1 year from the date of sanction of rehabilitation package.
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Rephasement of Development Loan

Overdues of interest free Development Loan/Working capital loan availed by units from Government may be rescheduled to be paid over a period of 3 years from the date of commencement of rehabilitation scheme by the financial institutions/banks in 6 half yearly instalments without interest.

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Tax related benefits
i.

The sick units under rehabilitation may be allowed payment of tax arrears under the KST Act 1957, CST Act 1956 and KTEG Act 1979 in six half yearly instalments with a simple interest of A½% per month. The tax arrears for the purpose of rehabilitation package includes tax amount under the respective Acts, penalty and interest computed up to the date of commencement of package to the sick units.
ii.

Future taxes payable by the industry under the aforesaid Acts [from the date of commencement of the rehabilitation package] may be deferred, without interest, for a period of three years. Such deferred taxes will be paid in three annual instalments along with the current taxes of the respective years after expiry of the deferment period.
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Terms & Conditions

The sanction of reliefs and concessions outlined above would inter alia be subject to the following specific terms and conditions.

1. The sanctioned benefits would be need based depending upon assistance required and would become effective only after the Banks/Financial Institutions sanction the rehabilitation package and certify that the unit under consideration would be viable for rehabilitation. In respect of self-financed units the district Level Task Force will assist the entrepreneurs in drawing up a suitable rehabilitation package. However, assistance under this order for such units will be considered only after the District Level Single Window Agency approves the scheme and any recognized bank/financial institution comes forward to extend financial assistance as envisaged in the scheme.
2. The District Level Single Window Agency headed by the Deputy Commissioner will consider and recommend the necessary reliefs and concessions to the units as suggested by the District Level Task Force and forward the recommendations to the State Level Committee headed by the Principal Secretary to Govt., Commerce & Industries Dept. as detailed in Annexure-1, to approve the package. Orders will be issued by the Commissioner for Industrial Development and Director of Industries & Commerce only after approval of the package by the State Level Committee.
3. These reliefs and concessions are available to units only once in lifetime.
4. The Implementation of the comprehensive package for rehabilitation of sick units would be done through a system of committees and as per procedure prescribed in Annexure-1.
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CASES REGISTERED WITH BIFR:
The following reliefs and concessions may be extended by the Govt. to sick industries registered in the BIFR for rehabilitation/revival;
i) Deferment and reschedulement of the outstanding Development loan for a period of three years subject to payment of 10% interest per annum on the defaulted/deferred instalments.
ii) Reduction in power cut for sick industries upto 50% of the cut applicable to normal units. This would be applicable to sick units for a period of two years only. Further extension at the end of the second year may be considered only if the said industry is on the path of recovery;
iii) KPTCL/Regional Power Supply Companies may be ordered not to levy fixed charges/demand charges during closure period;
iv) Arrears of energy bills to KPTCL/Regional Power Supply Companies may be allowed to be repaid in 6 half-yearly instalments and interest charges for defaults may be reduced at A½% per month; Arrears for this purpose will be arrears till the date as indicated in the Govt. Order as detailed in Sub Para 2.3 or 2.5 as the case may be.
v) KPTCL/Regional Power Supply Companies may be ordered not to charge interest for the closure period.
vi) Assistance to sick units in reaching equitable agreements through the Labour/Law departments.
vii) Assistance for sale of surplus land [if any, as per the approved rehabilitation package prepared by O.A] provided that proceeds from such sale are utilized as per the rehabilitation package.
viii) The requirement for production of guarantees of Banks/institutions for payment of dues by the sick units to Government Department or Government owned Corporation may be waived.
ix) The sick units under rehabilitation would be eligible for the payment of tax arrears under the KST Act 1957, CST Act 1956 and KTEG Act 1979 in six half yearly instalments with a simple interest of A½% per month. The tax arrears for the purpose of rehabilitation package includes tax amount under the respective Acts, penalty and interest computed up to the date as indicated in the Govt. order sanctioning the package to the sick unit

x)

 Future taxes [KST & CST] payable by the industry [from the date of commencement of the rehabilitation package] may be deferred , without interest, for a period of three years. Such deferred taxes will be paid in three annual instalments along with the current taxes of the respective years after expiry of the deferment period.
Note:

KERC in its Tariff Order 2002 has ordered that However considering request of the industries, the Commission has agreed to earmark an amount of Rs. 1.0 Cr. Out of the cross subsidy available from the industrial tariff and accords approval for implementation of the reliefs to the sick industries under New Industrial Policy by KPTCL. The amounts of reliefs and concessions extended by KPTCL/Regional Power Supply Companies, in excess of Rs. 1.0 Cr., will be reimbursed by the industries Dept. through budgetary releases, for which purpose KPTCL/Regional Power Supply Companies will first extend these reliefs to the concerned industrial units on the basis of Govt. Order sanctioning the relief packages issued by the Government and thereafter submit a consolidated claim on annual basis to the Industries Dept. for reimbursement.
2.1 Terms & Conditions:
Grant of these reliefs and concessions which would be need based depending upon assistance required would be inter alia subject to the following specific terms and conditions:
i) They will come into effect only after having been incorporated in Draft Rehabilitation Scheme approved by the BIFR/AAIFR.
ii) The Operating Agency shall prepare a draft rehabilitation report and submit the same to the State Government for approval.
iii) The company shall not declare any dividend until full payment has been made of entire overdues to the State Government.
iv) The company shall furnish quarterly reports regarding the progress made in implementation of the BIFR/AAIFR sanctioned schemes.
2.2 Sanctions by BIFR Sub Committees:
The BIFR sub-committee under the Chairmanship of the Principal Secretary to Govt., Commerce and Industries department will consider the draft rehabilitation report as prepared by the Operating Agency and is hereby delegated powers to sanction the reliefs as indicated inn 2 (i) to (x) above subject to following maximum reliefs in each case:
i) To defer and reschedule outstanding Development loan dues up to Rs. 50.00 lakhs [Rupees fifty lakhs] for a period of three years subject to payment of 10% interest per annum on the defaulted/deferred instalments.
ii) To reduce power cut for sick industries up to 50% of the cut applicable to normal units for a period of two years only.
iii) To waive monthly minimum demand charges during the closure period of the unit/factory;
iv) To charge interest at 6% per annum on the belated payment of three MMD and other arrears. Arrears, which are not specifically covered in the orders shall attract interest at 24% per annum as per energy supply regulations.
v) To grant relief for repayment of tax arrears as detailed in Sub-Para [ix] and future tax deferment as detailed in Sub Para [x] of the Para-2 above subject to condition that the financial implications of such deferment does not exceed Rs. 50 lakhs in each case;
vi) To assist the sick units in reaching equitable agreement in consultation with the Labour/Law department.
2.3 The sanctions made by the BIFR Sub-committee within the above delegated powers, will be incorporated in Govt. orders to be issued in each case with the approval of the Minister for large and Medium Industries and become effective after approval of DRS as indicated in Para 2.1 (i) above.
2.4 Sanctions by High Level Committee:
The High Level Committee under the Chairmanship of Chief Secretary to Government is delegated with following powers:
i) To defer and reschedule outstanding development loan dues beyond Rs. 50 lakhs [Fifty lakhs] and up to Rs. 1.0 Crore [One Crore] for a period of 3 years subject to payment of 10% interest per annum on the default/deferred instalments;
ii) To grant relief for repayment of tax arrears as detailed in Sub Para [ix] and future tax deferment as detailed in Sub Para [x] of the Para-2 above involving financial implications in excess of Rs. 50 lakhs in each case;
iii) To devise a suitable mechanism for the sale of surplus lands subject to proceeds there of being utilized as per the rehabilitation package; and
iv) To decide cases which envisage reliefs and concessions beyond the maximum limits outlined in this order.
2.5 Further all cases decided by the High Level Committee shall be placed before the Cabinet for approval.  
2.6 The composition of the sub committee and High Level Committee are detailed in Annexure-2 to this order.
2.7 The reliefs granted to eligible sick industries under this order shall be subject to annual review by the BIFR Sub-Committee under the Chair-manship of ACS & Principal Secretary to Govt., Commerce & Industries Dept. and the said Sub-Committee shall recommend to the BIFR/AAIFR the continuation or otherwise of reliefs granted based on the performance of industries on a year to year basis.
2.8 These orders shall be deemed to have come in to effect from 1.4.2001, in so far as the applicability to sick industries identified/registered on or after 1.4.2001. However the reliefs under this order shall be available to such industries only with prospective effect from the date of issue of this order. These orders shall be in force for a period of 5 years from 1.4.2001.

This order issues with concurrence of Finance Dept. in its U.O note No. FD 1543 Exp-I 2002 dated 9th Sept. 2002.

By order and in the name of the
Government of Karnataka
[T Premnarasimaiah]
Under Secretary to govt.[ID]
Commerce & Industries Dept.

 

 

 

 
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Annexure -1

The State Level Committee will be as follows:

1.

Principal Secretary to Govt. Commerce & Industries Dept

. Chairman

2.

Secretary to Govt. II. Commerce & Industries Dept

. Member

3.

Commissioner for Industrial Development and Director of Industries & Commerce

. Member

4.

Nominee of the Finance Secretariat

. Member

5.

Commissioner for Commercial Taxes/his nominee

. Member

6.

Nominee of the Labour Dept.

. Member

7.

Nominee of KEB

. Member

8.

Managing Director, KSFC

. Member

9.

Deputy General Manager, SIDBI

. Member

10.

Joint Chief Officer, RBI/his nominee

. Member

11.

Convernor of SLLIC/Concerned bank

. Member

12.

MD-KSSIDC/MD-KEONICS/EM-KIADB

. Member

13.

Additional Director [SSI]/Joint Director [SSI]

. Member- Secretary

The functions of the State Level Empowered Committee will include consideration of the recommendation of the District Level Committee regarding grant of relief package to SSIs and to confirm/approve the same and cause issue of formal orders in respect of each case. This committee will also function as an Appellate Authority and it shall review the decisions of the District Level Committees against any appeal preferred by the entrepreneurs. It shall also clarify any issues regarding the implementation of the rehabilitation packages. It shall also be authorized to remove anomalies, if any, in the interpretation/Implementation of the package.

District Level Committee:

The existing Dist. Level Single Window Agency headed by the Dy.Commissioner constituted vide G.O.CI 49 SPI 93. dated 30th Nov. 1993/15th Dec. 1993 is empowered to recommend the relief package to eligible Industries. The recommendations of the Dist. Level Committee can be given effect to only after approval confirmation by the State Level Committee.

1.

Deputy Commissioner of the district

. Chairman

2.

Chief executive Officer.ZP

. Member

3.

Lead Bank Manager [Member]

. Member

4.

Jurisdictional Deputy Commissioner/Joint Commissioner

. Member

5.

Jurisdictional Executive Engineer. KEB

. Member

6.

Branch Manager KSSIDC

. Member

7.

Representative of KIADB

. Member

8.

Representative of  KSFC

. Member

9.

Commissioner, Urban Development Authority

. Member

10.

Assistant Director of Town Planning

. Member

11.

Jurisdictional Officer of Pollution Control Board

. Member

12.

Joint Director. DIC

. Member

13.

Commissioner/Chief Officer of the concerned CMC/TMC

. Member- convenor

14.

District Labour Officer

. Member

15.

Dy. Chief Inspector of Factories of the concerned area

. Member

The above Single Window Agency and empowered committee shall sanction the package of reliefs and concessions for identified sick SSI units based on the recommendations of the Task Force:

District Level Task Force:

1.

Joint Director in head Office/Joint Director, DIC

. Chairman

2.

Jurisdictional Joint CCT/Deputy CCT

. Member

3.

Representative from KSFC/Lead Bank

. Member

4.

Representative of concerned Bank

. Member

5.

Deputy Director [Credit]. DIC

. Member- Secretary

The functions of the District Level Task Force shall be the following:

a) Undertaking to identify a SSI unit as sick, based on the guidelines of RBI
b) Certify SSI units as 'Sick Unit' for the purpose of availing this package.
c)  Cause to get viability and potentiality report of the said SSI unit through the concerned leading institutions.
d)  To examine the possibility of rehabilitating such SSI first under the National Equity Fund scheme. Govt of India.
e) To recommend to the District Level Committee. The quantum of margin money to be sanctioned.
f) To recommend to the District Level Committee and other concessions to be granted to the unit.
Annexure -2
Composition of the High Level Committee and BIFR Sub-Committee which consider sick industries registered with the BIFR.
A.     High Level Committee
    1. The Chief Secretary to Government - chairman
    2. The ACS & Principal Secretary to Govt./Principal Secretary to Govt., Commerce & Industries Dept. Member
    3. The Principal Secretary to Govt., Finance Department - Member
    4. The Principal Secretary to Govt., Energy Department - Member
    5. The Principal Secretary to Govt./ Secretary to Govt., Urban Development Dept - Member
    6. The Principal Secretary to Govt./ Secretary to Govt., Labour Development Dept - Member
    7. The Secretary to Govt. [SSI & Mines] Commerce & Industries Dept - Member
    8. The Commissioner for Commercial Taxes - Member
    9. The MD, KSIIDC - Member
    10. The CMD, KPTCL - Member
    11. The Managing Director/Chief Engineer, Electricity supply Company - Member
    12. The Managing Director, KSFC - Member
    13. The Commissioner for Industrial Development and Director of Industries & Commerce - Member Convenor
B.Composition of the BIFR Sub-Committee:
    1. The ACS & Principal Secretary to Govt./ Secretary to Govt., Commerce & Industries Dept. Member
    2. The Commissioner for Commercial Taxes - Member
    3. The Commissioner for Industrial Development and Director of Industries & Commerce - Member Convenor
    4. The Chief Engineer, KPTCL/Electricity Supply Company- Member
    5. The Deputy Secretary to Govt. [B & R]. Finance Department - Member
    6. The Additional Secretary to Govt/Deputy Secretary [SUMC], Commerce & Industries Dept - Member Convenor
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